Mumbai: As the COVID-19 pandemic continues to crush demand and supply chains, diamond exports from India, which polishes about 90% of the world’s rough diamonds, will collapse by as much as a quarter this year, experts say.
By the financial year ending in March 2021, overseas sales of cut and polished diamonds may slump 20 per cent to 25 per cent from $18.66 billion last year, according to Colin Shah, chairman of the Gem & Jewelry Export Promotion Council. That will push exports to the lowest in data going back to the 2009 fiscal year on the association’s website.
“In 2008, things were bad for a quarter, but the business recovered after that,” Shah said in an interview. “This is now two quarters gone.” While festivals such as Diwali, Christmas and Valentine’s Day will prop up demand in the next six months, that won’t be enough to lift full-year exports, he said.
India imposed one of the world’s strictest lockdowns in March to contain the outbreak of COVID-19. That brought the economic activity to a grinding halt and put the economy on course for its first annual contraction in more than four decades. With more than 7 million infections, the country is one of the world’s virus hot spots.
With the COVID-induced restrictions, production centers were closed or operating at very low levels. Thus, rough-diamond imports fell in line with poor end-product demand, leading to the contraction of exports to $5.5 billion, i.e. by 37 per cent, in the six months through September from the year-earlier period.
Workers have now started returning to the diamond-polishing hubs of Surat, Mumbai and Kolkata, and factories are operating at 70 per cent to 80 per cent of capacity with social-distancing norms in place, Shah said. Still, it’s difficult to predict global supply chains as rules to control the virus change frequently, he said.
The International Monetary Fund warned this week the world economy faces an uneven recovery until the virus is tamed. Chinese consumers are starting to spend again, while in Europe, the luxury sector is back near pre-pandemic levels despite a surge in Covid-19 cases that’s hurting normal tourism.