Indian Diamond Dominance

BY RIPAL PATEL

The diamond manufacturers today are in a reasonably healthy situation coming off a very nice, strong year. Their inventory levels are at all-time lows, with good profit margins over the past quarter. Demand is still very strong, especially from America and China.

Retailers in America were used to an oversupply of diamonds and jewelry-manufacturing capacity. Last year, because of the strong demand, there weren’t enough diamonds and there wasn’t enough jewelry-manufacturing capacity. This year, most of the majors have given purchase orders. That’s been good for the pipeline because the diamond manufacturers have the diamonds they need, or are manufacturing them. They are reasonably well-prepared for their orders for this fall. As far as China is concerned, the business is totally demand-dependent. If there is demand, pricing and supply will follow.

In terms of smaller diamonds, we’re seeing a severe shortage for a variety of reasons. Close to $1 billion of lab-grown will be cut and polished in Surat this year. There is a huge demand for workers, with the lab-grown sector taking the same workers the natural industry needs. Nearly 15% to 20% of the workers have gone back to their hometowns or have left the industry. Salaries have gone up — more or less doubled in the last 12 months. And even at double salary, there are not enough workers. This will have an inflationary impact on the pricing of diamonds.

Why is India so successful?

Indians are able to provide greater credit to grow their business, because they have a great trust network. The trust factor is huge when you’re handling millions of dollars of diamonds. Having a trust network enables better risk management and greater risk taking.

Whether you’re buying rough diamonds or manufacturing, you’re giving millions of dollars of diamonds on memo to dealers in Mumbai or Surat, and then ultimately even to end-retailers in America or China. The Indians have this figured out quite well, and that’s one key part of the success.

Secondly, there is India’s culture, its entrepreneurial spirit, and the great cooperative power of the Indian family. The family model has been massively successful for the Indian community, where one brother is in a Surat factory, one is in Mumbai, one’s in Dubai, Antwerp, New York, etc. Indians are able to manage their conglomerates because of this very capable family culture that they have.

Thirdly, Indians are better at polishing diamonds due to the entrepreneurial spirit of our workers. Indian cutters go beyond standard cutting. They are loupe-examining even small stones to make sure they get the most money out of production.

Those few points make all the difference between profit and loss — that ability of the Indian worker, the Indian promoter, the risk-bearing ability, and competence of family members across the globe.

India stands to dominate the diamond market well into the future.