The slowdown in diamond industry continues as diamond sales have been hit the hardest by the Government’s move to scrap the old 500 and 1000 notes.

The Diamond industry is facing challenging times as we see that globally, the millennial consumers are not finding enough interest & confidence in buying diamonds & diamond jewellery compared to other attractive ways to spend their money. According to De Beers – world’s largest diamond mining company, since 2014, the world has experienced moderate annual growth at 2.5 per cent.

After two-year slack, diamantaries from world’s largest diamond cutting and polishing sector in Surat were confident about getting good sales as polished diamond demand was strong in USA, China, Hong Kong and Japan. The diamantaries were working hard this year to meet the overseas demand in the Christmas season in December. However, following the announcement of the scrapping of the old 500 and 1,000 currency note by the government the uncertainty continues to loom over the diamond industry.

The industry that was supposed to get back to normal business after 20-day Diwali break in November, had to extend their vacation period till December 15. The diamond industry in Surat and Mumbai is set to be hit by 40 per cent in short run due to Centre’s recent decision to scrap 500 and 1000 notes. The diamond sales have been hit the hardest post the announcement as the industry thrives on cash transaction culture. Industry insiders believe that such a move will make payments stuck for at least next 2-3 months due to unavailability of cash in the market.

Industry sources said that the Angadia firms have unanimously decided to reopen in the first week of December. Angadias are the backbone of the industry, especially for the small and medium diamantaires dealing in cash and chitthi system. “The scrapping of old notes has cast a dark shadow on the small and medium diamantaires and traders in Surat and Mumbai. The diamond business is done in cash and almost all the traders are running here and there to convert their old notes into new notes,” said Managing director of Dharmanandan Diamonds, Hitesh Patel to Times of India. However, the big diamond companies will not be affected by this move as their dealings in exports and imports are through the banks.

While speaking to Jewel Trendz, the diamond traders and jewellers said diamond sales have crashed by 45-50 per cent compared to a week before demonetisation, the silver and gold segments also stooped up to 30 to 40 per cent. But, gold seems to have capatalised on its status as a safe-haven asset and an alternative to cash, apart from its traditional demand during marriage season, they added.

“The demonetisation step has not affected the diamond prices, but there are no sales happening in diamonds, post the move. It will take at least 3-4 months for things to come back to normalcy,” Ishu Datwani, founder, Anmol Jewellers. Sources said that the scrapping of old notes is all set to phenomenally decrease the demand of small-sized diamonds in the domestic market. Surat, Amreli, Bhavnagar etc. are the lone centres manufacturing small-sized stones.

There are around 4,000 diamond units including big, small and medium in Surat. The industry employs over 4.5 lakh workers and that the annual production of polished diamonds is pegged at 90,000 crore. “There is no point in opening the units early, because the demand for diamonds in the domestic market has been hit hard. Consumers are not buying diamonds, instead they prefer gold as exchange for their old currency notes. It will take around four to five months for the normalcy to return in the industry,” said a diamond manufacturer.

Consumer demand in US has grown stronger but it has slowed down in India and China. The consumer demand in India slowed due to restricted consumer credit environment and overall weakness in consumer spending. However, in future the demand will continue to generate from US, China and India as the household income keeps increasing in next 10 years.