How Does The Diamond Industry Work?

The diamond industry in India comprises approximately 70% of the global diamond exports, making it one of the most successful and lucrative industries. The rate of employment is huge and this industry has been a witness to steady growth of about 15% every year. Since India was one of the earliest and the only source of diamonds on a global scale for the longest time, the country is still seen as one of the pioneers of trading in diamonds.

Gradually, people started realising the significance of diamonds and this industry started gaining momentum. Eventually, it was considered one of the most sought-after professions. In fact, in ancient India, there were people known as ‘Mandalins’, who supposedly had expert knowledge in diamonds. People in this profession were highly respected and held in overall high regard.

How the Diamond Industry Came into Existence in India?

The first-ever diamond producing mines that were found in India were in the Golconda region. The most famous diamonds that are known to the world have all been formed in this region. The Koh-I-Noor Diamond, Orlov Diamond, Sanc Diamond, Darya-I-Noor and Hope Diamond are all diamonds of Golconda.

When India started developing international trade relations, diamonds slowly entered the royal courts of Europe. Then, in the 15th century, clothes started to be adorned with diamonds and gradually it became a popular embellishment. But, since the demand for Indian diamonds was soaring with each passing day, the diamond industry saw a decline by the end of the 18th century as the necessary resources were running short.

Reorganisation Of the Industry

It was in the 1960s that the Indian polishers of diamonds decided to strengthen the diamond industry and formally organise it. A group of jewellery makers and polishers belonging to the state of Gujarat found hope in the form of a new gem that would be their saviour from poverty.

In India, the diamond industry during this time mainly dealt with stones that were smaller in size, weighing about 0.20 carats or less. Although this was a small beginning, the export of polished diamonds from India in 1966 was worth a total of $ 17 million. This beginning was the stepping stone to the creation of the modern diamond industry, which now dominates the world.

The Advent of the Bharat Diamond Bourse

The Bharat Diamond Bourse, located in the north of the city of Mumbai (Maharashtra), is known to be the world’s biggest diamond exchange. Founded in 2010, this exchange is spread over a huge area of 20 acres and houses about 2500 big and small diamond merchants. There 26 towers in all, each having 9 floors and boasts of four walk-in vaults, a huge trading floor, lockers, safe deposit boxes, and offices for diamond traders. It also has state-of-the-art facilities to ensure that their daily work does not get hindered.

Today, the Bharat Diamond Bourse looks after 98% of India’s diamond export.

India as the Leader of the Global Diamond Industry

India has always been a torchbearer of diamond production and it now holds the position of the best global manufacturer of diamonds. As a matter of fact, India is behind the production of every 8 out of 10 diamonds in the global market. The cutting and polishing industry here is situated in western cities such as Surat, Ahmedabad, and Mumbai. This business lies in the hands of about 2500 inter-connected families who have established an empire in this business.

The annual production of polished diamonds in the diamond industry in Surat is worth Rs. 1 trillion. While the majority of the diamonds are cut and polished in Surat, other gems are looked after in Ahmedabad, Amreli, and Bhavnagar. Currently, a workforce of approximately 1 million people works in the Indian diamond cutting and polishing industry. This sector is well-organised with a four-tier structure. The position at the top of the structure is claimed by The Gem and Jewellery Export Promotion Council (GJEPC). This Council coordinates between the industry and the government and works towards promoting the jewellery industry of India on a global scale.

Next are the largest private export and import companies which make up the second tier. All of these are a part of the diamond cutting and polishing industry. The third tier consists of the small and medium scale units of the industry which share contracts with important rough importers. Lastly, the fourth tier is made up of the small scale units of this sector, having expertise in processing very small diamonds.

Even though the diamond industry often goes through a lot of ups and downs, the future of this industry looks bright as it has always been one of the most competitive industries in the world, boasting of a large workforce.

The Growing Production of LGD and LGD Jewellery

The lab-grown diamond (LGD) jewellery makes up about 2% of India’s gem and jewellery exports to the United States of America, with a total amount of $14 million. Other than the USA, India is also an exporter of LGD jewellery to Australia, France, Italy, along with certain Asian and European countries.

According to Mr. Shashikant Dalichand Shah, the chairperson of The Lab-Grown Diamond and Jewellery Promotion Council, there will be a huge spike in the demand for lab-grown diamonds. This is mainly because of its rising demand among the population belonging to the middle-class.

Since synthetic diamonds are 75% more inexpensive than original diamonds, they are becoming more familiar with the middle-class, who wish to own a diamond which looks real, without burning a hole in their pockets. Unlike real diamonds, the supply of lab-grown diamonds can be increased at any given time. This makes it a more convenient option, which, in turn, has paved the path towards which the diamond industry is headed. At present, the global market of synthetic diamonds is worth $10 trillion.

Government Policies that have Benefited the Industry

The Government of India has taken a lot of steps to promote further growth of the country’s diamond industry over the years. Here is a list of initiatives taken up by the government:

1. Since the diamond industry is responsible for bringing in foreign wealth in great numbers, the cut and polish diamond (CBD) industry is free from duties imposed on rough acquisitions. Along with that, the government has always backed the Indian Gems and Jewellery sector by allowing personal possession of jewellery through the airports in Hyderabad and Jaipur, along with Kolkata, Delhi, and Mumbai, Bangalore and Chennai, and by setting up of Gems and Jewellery SEZs.
   
2. The income Tax rate was decreased to 25% for smaller companies which would have a turnover of Rs. 50 crore in a year. This was a step taken to motivate smaller and medium jewellery manufacturers and exporters.
   
3. The Government had also taken the initiative to extend the Pradhan Mantri Kendras to 600 districts all across the country. As a result, it will help in skill creation in the gems and jewellery sector. Not only that but it will also be helpful in the betterment of the quality and industrial significance of vocational training to workers and students, thereby benefiting the jewellery industry as a whole.

The Indian diamond industry has always been dynamic and it is known to easily adapt to global trends. Although the industry is presently incurring a lot of loss due to the Covid-19 pandemic, which has dealt a big blow to the global economy in general, experts say that the industry will slowly but surely make a comeback in the upcoming financial year. Hence, there will be significant growth in demand and the sales will improve in 20-21. Although, the need of the hour is to chalk out an effective plan that will help industries flourish during periods of crisis.

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FAQs

Q. What is the difference between the original diamonds and lab-grown diamonds?

A. There is no difference between a real diamond and a lab-grown diamond. Both are made out of 100% carbon and share the same qualities.

Q. Are diamonds more expensive than platinum?

A. Yes, diamonds are indeed more expensive than platinum. Platinum costs $25 per gram whereas Diamonds cost anywhere between $2500 to $16000, depending on its clarity, shape, and colour.

Q. Is it more profitable to invest in diamonds than gold?

A. Since diamonds are not considered to have any resale value, most people invest in gold for long term profits. However, the price of diamonds is in no way related to the stock market, hence it is a more stable investment.