Cautious Optimism in India – IDEX’s Memo

There have been three lockdowns, coronavirus outbreaks centered on Surat, bankruptcies, suicides and escalating tensions on the disputed border with China.

In addition, many of the 900,000 diamond artisans are migrant workers who headed back to remote villages in droves when the factories closed. Add that inflexible peculiarity of India’s diamond workforce into the mix and you might see little reason for optimism.

But the majority of factories are now back at work, albeit at 70 per cent capacity, because of strict social distancing rules. “Industries and business across the globe came to a standstill with COVID-19,” said Mr Shah, the industry veteran behind Kama Schachter, one of Asia’s top 10 diamond jewelry manufacturers and exporters.

“In the initial phase of lockdown, the diamond factories and units were completely closed down. There was no demand for goods and manufacturing had come to a halt, that resulted in karigars (Urdu for artisans) leaving for their hometowns.

“However, the scenario is changed now. Currently in Surat, of the nearly 7,000 diamond manufacturing units, about 70 per cent to 80 per cent of small, medium and large units are operational and are following stringent government guidelines. Orders have commenced from the USA, China and parts of Europe and the industry is in its path of recovery.”

GJEPC called on its members to impose several voluntary embargoes on rough purchases in recent months so that it could focus on selling existing stock. Did that work?

Pic shows Colin Shah

“The self-imposed, voluntary embargoes helped stabilize prices of polished diamonds,” said Mr Shah. “As demand precipitously dried up in every single market, manufacturers feared that even a reduction of diamond production would not be enough to stop a loss of value on inventory, then estimated at $6-7 billion.

“It was felt that manufacturing polished goods should be a reflection of true consumer demand and the Indian industry demonstrated the maturity to manage its own demand-supply mechanism.”

In June and July karigars were hiring buses and trucks to take them and their belongings back home, with little prospect of them going back. Local media estimated that 80 per cent of the workforce returned, many resigned to doing poorly-paid work on family farms.

“The scenario has now changed, people are coming back to Surat and Mumbai as we can see factories and units are up and running at 70 per cent capacity,” said Mr Shah.

“There are workers who haven’t returned yet, but I believe gradually they will come back as and when the situation normalizes.”

Is he worried that other countries may snatch business away from India as it struggles with the ongoing pandemic?

“Manufacturing activity has resumed and as markets are reopening, Indian exporters are busy catering to holiday season demand from the USA, China and Europe, which is a good sign. Through virtual platforms, GJEPC has been connecting manufacturers with buyers from across the world through various virtual initiatives. GJEPC is undertaking efforts and initiatives and is determined to bring the industry and business back on track.”