Diamond Processing: Bumpy Ride Ahead

India’s diamond processing industry, which brings US$12 billion in revenues each year and processes 11 of every 12 diamonds in the world, is concentrated in the state of Gujarat, which accounts for almost 95% of the country’s diamond polishing and trade. However, the industry has been facing difficulties amid the global recession, which has led to the loss of jobs of some 100,000 people in the industry as a quarter of the country’s diamond-processing units have shut down.

The rising price of raw materials imported from Africa, Russia and Canada has put further pressure on the industry, which is likely to be exasperated by the demands for higher wages. The protests in Bhavnagar forced the Surat Diamond Industries Association into a 20% increase in the wages for the diamond workers. This could lead to a further blow to the cost advantage the country’s diamond processing industry possesses. Foreign investment in this area still has mixed offerings. Stock prices of several companies in the gem and jewellery segment in Sensex, have taken significant beating of late. With increasing input cost, it will be very difficult for the diamond processors to work with the current margins. In days to come, we might see further loss of jobs in the segment, especially with European automation making skilled work a lot easier now and reducing complete dependency on manual cutting and polishing.