Why are diamond prices falling in India?

Are diamonds losing their shine?

The precious stones have witnessed a huge fall in in prices lately.

This, even as the country sits on a huge stockpile of diamonds.

But what do we know about this? And why is this happening?

Let’s take a closer look:

What happened?

According to The Times of India, the price of both synthetic and natural diamonds have fallen – particularly the latter.

“It would be an understatement to say that business has been slow. Diamond rates have been falling for the past 22 months,” Ashok Gajera, CMD, Laxmi Diamonds, told the newspaper. “From about 38,000 workers employed in Surat to small/medium businesses and large enterprises, everyone has been impacted,” he said.

Gajera added that the diamond stocks were being devalued day after day and that traders were being forced to execute orders at a loss.

Gajera said natural diamonds are being given tough competition by flawless lab-grown stones.

Lab-grown diamonds which were $300 a carat in July 2022 are selling at $78 a carat lately.

India’s overall gems and jewellery exports witnessed an on-year decline of 13.44 per cent in June at Rs 15,939.77 crore ($1,909.57 million) amid muted demand in overseas markets, according to data by Gem and Jewellery Export Promotion Council (GJEPC).

The total gems and jewellery exports stood at Rs 18,413.88 crore ($2,240.77 million) during June 2023, the GJEPC data added.

The overall exports of cut and polished diamonds dipped by 25.17 per cent in June to Rs 8,496.87 crore ($1,017.87 million), compared to Rs 11,354.67 crore ($1,382.13 million) for the same period of the previous year.

Economic Times in June reported that nearly 4 lakh workers in the lab-grown diamond business were facing hardships.

The workers’ union claims waged are being delayed by up to 20 days every month.

“Workers in the LGD industry are facing trouble over wages. Wages are being delayed as the LGD manufacturers say prices of LGD are falling rapidly and exports are not picking up the way they had been projected,” Diamond Workers Union of Gujarat president Ramesh Zilariya told the newspaper. “The workers fear that there might be job loss if prices do not pick up.”

The value of lab-grown diamonds has also sunk 45 per cent in the past year.

Paul Zimnisky, a well-known diamond industry analyst, said lab-grown diamonds are being sold at a 90 per cent cheaper price than natural diamonds.

Back in 2015, this difference was 10 per cent.

Zimnisky said the sale of lab-grown diamonds could fall to as low as single digits in 2024.

This is 20 to 30 per cent lower than when these diamonds were at the height of their popularity.

Why is this happening?

Experts say the global demand for diamonds has slowed down.

“China, which used to be a large buyer of flawless mined stones, is suddenly not interested and its purchasing power is merely 10 to 15 per cent of what it was,” Gajera told the newspaper.

Gem and Jewellery Export Promotion Council (GJEPC) chairman Vipul Shah said this was mainly due to the weak demand from the key markets, China being the key one – which accounted for approximately a third of India’s cut and polished diamond exports.

Others blame successive governments at the Centre.

GJEPC executive director Sabyasachi Ray told The Times of India, “We have been told ours is a sector of rich people. But that isn’t so. There is a front-end and there is a back-end. The back-end comprises millions of karigars (craftsmen) and blue-collar workers. The gems and jewellery industry employs 5 million people, many of whom hail from marginal sections. These karigars are there everywhere — Mumbai, Satara, Sangli, Kolhapur, Gujarat. Imagine the scale of employment nationwide if 50,000 people work in Bharat Diamond Bourse in BKC and one lakh in SEEPZ. It is such a labour-intensive sector that anything the govt does will impact five million workers.”

With inputs from agencies