“The demand in the US and China is very strong and there is revenge buying by consumers,” said Colin Shah, chairman, Gem & Jewellery Export Council.
In 2020-21, diamond exports had fallen 12% to $16.4 billion, although a bigger plunge would have been expected when the world went into unprecedented lockdowns.
“Exports have been rising, and averaging $2 billion per month since October 2020,” said Rahul Guha, director, Crisil Ratings. “To be sure, there will be some moderation in the second quarter of this fiscal, which is typically a lean period. But the festival season that begins in the export destinations from the third quarter will boost revenue to pre-pandemic levels. That will be tantamount to a 20% growth in diamond exports by revenue this fiscal.”
As nations recovered well in the second half of the fiscal, the tumble in exports was halted, according to an analysis of 70 diamantaires rated by Crisil, accounting for a third of industry’s total revenue.
Towards the second half of last fiscal, pent-up demand and stimuli had buoyed consumption of diamonds and jewellery in the US and China, which account for 75% of India’s polished diamond exports.
With the pandemic said to be contained in China, and the US inoculating 40% of its population, consumer confidence has improved in both countries. Demand will also be bolstered by improving economic growth and declining unemployment. Additionally, restrictions on overseas travel and lower spending on hospitality mean celebrations are largely restricted to spending on gifting, including diamond jewellery.
“Last year, there was a global lockdown due to the Covid-induced pandemic in the April-June period. That impacted our exports. But this fiscal, the situation has changed,” said Vipul Shah, CEO of diamond exporting firm Asian Star. “Even though India is facing a surge in Covid cases, internationally the situation has improved and that is why we are seeing exports moving up. April and May have been good months for exporters.”
The onset of the second wave saw smaller, labour-intensive polishing units facing 20-30% labour migration. The larger ones restricted this to 10% by following physical distancing norms and providing safe transport to staff. The industry’s current operating rate is more than 80%, with sufficient inventory to tide over any production loss in the first quarter of this fiscal.
The pandemic has also improved the management of rough diamond inventory. Earlier, prices of roughs increased faster than those of polished diamonds, leading to stocking up of the former. The pandemic led to a correction in the inventory of roughs last fiscal, and this trend continues. Diamantaires now tend to purchase roughs when there is visibility in polished diamond sales.