History has it that India was once the main producer of diamonds, till diamonds were discovered in Brazil and Africa. Today, however, India is the main supplier of finished diamonds to the world. It is said that 11 out of 12 diamonds set in any jewellery in the world are cut & polished in India. To put it simply, irrespective of whichever part of the world you live and you buy diamond studded jewellery, there's a good chance you'll be taking home a diamond processed in India.
Traditionally, the ‘hira karigars’ or the diamond cutters used to shape the rough diamonds using ‘ghantis’ or polishing wheels. Today, the scenario of the cutting sector tells another story. The town of Surat (in the Gujarat State), which is about 250 kilometres north of Mumbai, is one of India's most extraordinary success stories. With large factories using modern cutting and polishing machineries being the order of the day, Surat 's diamond cutting and polishing sector has consolidated into large professionally managed facilities using the most sophisticated and latest technology.
The diamond cutting industry in India can be still considered an unorganized sector, despite attempts by large companies to corporatize their businesses. It consists of more than 100,000 units, big and small. Gujarat alone houses 80% of all the processing of diamonds produced in the country, with a concentration of 90% in diamond cutting companies in the single city of Surat. India completes 60% of the diamond cutting and polishing business worldwide. About half the diamonds exported from India originate in Surat and estimates for this city are that this industry alone employs about 700,000 workers and more.
Surat is the heart of India's thriving diamond-polishing industry besides other cutting centres in surrounding areas; as well as Mumbai. India dominates the polishing business, despite having no diamond mines of its own. Recently, exploration of the Panna Mines in North India was initiated and it would be a while before rough supply can be expected. Therefore, most of the rough stones polished in Surat and elsewhere in India now are mined in Angola, Botswana, Namibia and Russia.
Way back in the 1970s, India began cutting low-quality gemstones and exporting them to the U.S. This paved the way for a robust cutting centre to thrive as labour was cheap and easily available. Having said that, it is not just cheap labour that allowed India to find a niche for itself in the diamond-polishing business, but the main edge comes from the enterprising Palanpuri Jains of Gujarat who turned the very scattered cottage industry to a robust Rs.80,000 crore industry of today.
The Palanpuris, an enterprising lot, hail from the town of Palanpur in Gujarat is a close-knit community that thrives in the atmosphere of secrecy and informality. The Indian diamond industry is built on trust with no written contracts. Even today, this method of doing business is prevalent. Stones worth millions of dollars are traded on just verbal agreements and transported with virtually minimum security. The Palanpuris have also successfully ventured overseas, setting up family-run polishing centres and sales offices in Antwerp and Tel Aviv, the USA and now in China.
Years ago the stones that were processed in India were only of smaller size, generally smaller than 0.5 carat, because companies were not technically well adapted to cut stones from 1 to 2 carats. But understanding the potential business opportunity, the Palanpuris gradually moved into larger, pricier stones. The perception that stones that are processed in India are only of smaller size, generally smaller than 0.5 carat does not hold good anymore. Today, the fact is that many large manufacturing facilities are technically well equipped with high tech technology to cut bigger stones from 1 to 5 carats. The high end, larger stones are an irresistibly lucrative market, as it is assessed to account for half of the value of the entire world's diamonds. Though these top-quality stones were mostly cut in Antwerp, New York and Tel Aviv in the past, today they are processed in many branches of Surat-based companies manned by Indian diamond cutters. Some companies have hired master cutters in Belgium and Israel to learn the skill from them. For the past few years, many large manufacturing factories in Surat, too, have been processing bigger stones in substantial amount. The diamond industry started in a very small way during 1950 in Surat to become one of the largest producers of cut and polished diamonds in the world today. The main hub of big and small units is in Varacha Road and Mahidharpura in Surat. Indisputably, Surat is the main centre for cutting and polishing diamonds sized less than 5 points and up to 5 carats.
Small and medium diamond makers from Surat have set up hundreds of units in tribal areas like Jhankhvav, Mandvi, Vankal, Ahwa, Dang and border villages of Nandurbar in Maharashtra and Vansda, employing tribals, including women from these areas. Tribals are now processing Rs 1,300 crore worth diamonds of small sizes every year earning Rs.8, 000 to Rs.10, 000 a month as a diamond polisher. One small entrepreneur, who set up units employing 15 tribal men are now employing around 175, including 65 women. Another has set up two diamond polishing units in Jankhvav near Mandvi and at Ahwa in Dang district where out of 400 diamond workers in both the units, nearly 100 are women.
An interesting development, of late, is the entry of women work force in the cutting and polishing sector. Your next purchase of diamond-studded jewellery may diamonds which were polished by tribal women from Gujarat. In recent years, tribal women taking up diamond cutting and polishing in villages of Tapi, Surat and Dang districts has increased manifold. In fact, every eighth diamond polisher in these regions is a woman. Surat, the world's largest diamond cutting and polishing centre, has one woman polisher for every 12 workers. Talk about women empowerment!
With nearly one million employees in its diamond manufacturing sector, India is today the world's largest manufacturing centre for cut and polished diamonds, contributing 60% of the world's supply in terms of value and 85% in terms of volume. Eleven out of every 12 diamonds set in jewellery worldwide are processed in India, according to India's Gem & Jewellery Export Promotion Council (GJEPC). It is said that India by 2015, India will have a 49.3% share of the world diamond roughs for processing in value terms, with 21.3% going to China, 7.1% to Russia, 5.5% to South Africa, 4.7% to Israel and 1.4% to the US.
Over the years, India, with its significantly lower labour costs and its fast and easy adaptation to new technology, has eaten into the chunk of the Israeli business, and totally taken over the production of the smaller, brilliant cut diamonds. The low-cost labour is one of the main factors behind India's success. According to research analysts, India spends US$10 per carat on the polishing and cutting of diamonds, against China's US$17 and South Africa's US$40 to US$60.The cutter/polishers’ wages range from $80 to $100 per week depending upon other variables like experience, skill in various types of cuts etc. Some craftsmen are highly skilled and can cut/polish stones weighing a fraction of a carat into polished gem.
For many years now India has been striving to further lower manufacturing costs by securing direct sources of rough diamonds by striking deals with mining companies. The entire industry is dependent upon import of rough diamonds on a regular basis. A few years ago, Russia's state-owned diamond giant, Alrosa signed a three-year agreement with Diamond India, to supply rough diamonds. The deal secured a direct source of supply for local diamond companies which until then had to import rough diamonds from centres such as Belgium and Israel, adding to their costs. This direct source of roughs leads to cost savings of at least 3% to 4% for the Indian manufacturing companies.
Among the new entrants, China plays a big role in the diamond world hierarchy, in all areas like cutting, jewellery as well as in consumption. The cutting industry is rather small of 20000 to 30000 persons and most of the companies are located in the cities Panyu (Guangzhou) and Shenzhen (Shandung). The Diamond Exchange Centre in Shanghai, the two gemmological laboratories, and a recent lowering in taxes on importing cut stones, has given impetus to China. Not surprising that China is affecting the world economy by its sheer market size. When all industries worldwide are impacted by the Chinese market, can Diamond/jewellery industry be far behind? It is heard that China’s diamond demand is inflating prices at the wholesale level all over the world!
On the whole, the market for diamonds is poised to grow in the future as demand from the burgeoning middle classes of China is increasing by the day. To utilise this opportunity and make a mark in the Chinese market, some diamantaires have set up manufacturing units in China, as wages there are lower than in India. An analytic study shows that in 2015, China is forecast to have a 13% share of the worldwide market for jewellery consumption, second after the U.S. with a 26% share and followed by India with a 12% share.
Currently, India is facing stiff competition from China in matters of shortage of skilled manpower. China is thriving well as manpower costs are lower and is therefore developing into an important polishing centre. In addition, there is a growing preference for polishing diamonds in countries where the diamonds are mined... like in Africa. This is essentially a political pressure which will have to be complied, which means the Indian sector will have to face problems at home too.
Just like India, China too is not a large producer and therefore has to import rough diamonds from Africa. Going by China’s increased appetite for rough diamonds, it’s obvious that they are planning on increasing their share of the market. Beijing is the new centre for diamond cutting and polishing on the horizon. China is doing all it can to push out other competitors by contracting for large supplies of rough diamonds directly from the source, Africa.
Apparently, the Chinese government has begun to initiate multi-billion dollar deals for rough diamonds in exchange for things that China produces like medicines, oils, and industrial goods and services. Also, China’s investment in Africa is a large threat to the Indian diamond cutting and polishing industry. The demand for diamonds is bound to increases, prices may go up, and supply will dwindle for other major players. Not to be outdone, India is taking up measures to create similar barter exchanges between African countries and India too.
These days India is facing more and more competition from China and Thailand. Clearly, there are opportunities and obstacles ahead for both India and China; and success will go to the player in this industry who will adapt and evolve. The new competition from China is undoubtedly a huge threat to India’s diamond industry, which is currently at 60% of all diamond finishing business.
While China is not into exports of diamonds currently, the growing demand for finished diamonds within is a huge market to be catered to. This increasing consumer base in China has given India a good opportunity and has exported nearly US$ 7 billion worth of diamonds to China. Even though China’s growing cutting and polishing industry represents a threat, the growing consumer base is a boon, albeit for now, to India. With India having its own domestic market as well as overseas demand to cater to, it is taking steps to ensure its supply of rough diamonds, even as China is increasing its investment in this area.
In the event of an India-China face-off, the prices of diamond worldwide will have unimaginable results. Prices will surely rise for consumers in the United States with Chinese entering the business in large numbers. In addition, if China enters into many multi-dollar contacts and blocks supply, then it will rule the price scene by becoming a cartel-of-sorts. And, with China investing heavily in the diamond business, it looks like India has a tough time ahead.
Aruna Gaitonde for Rough&Polished, from Mumbai