Recovery in key export markets likely to arrest decline in revenue of the country’s diamond industry to 20 per cent

Recovery in key export markets and pent-up demand are likely to come into the way of a decline in revenue of the country’s diamond industry to 20 per cent at USD 15 billion, according to a Crisil Ratings report.

The report said that when the COVID-19 pandemic was here there everywhere, the industry was expected to see a third of its revenue shaved off this fiscal.

However, this could now get arrested at around 20 per cent. The recent upsurge in spending on diamonds riding on a combination of pent-up demand and recovery in retail offtake in key markets such as the US and China is expected to help India’s diamond industry contain its decline and close this fiscal with a revenue of over USD 15 billion, Crisil Ratings said in the report.

Sluggish demand and extended lockdowns globally saw exports plunge to USD 5.5 billion in the first half almost half of the previous year’s business, it said. However, exports in the third quarter ended December 2020 rose to an estimated monthly average of USD 1.6 billion, setting the industry up for a tryst with the USD 15-billion-mark for the full year, it added.

Amid the weak demand scenario, however, the miners reduced the prices of rough diamond by almost 10 per cent around the end of the second quarter. With demand also on the rise gradually, the prices of polished diamonds increased by almost 2 per cent in the third quarter. This helped the industry wipe out a portion of the operating losses of the first half, the report said.

The Indian polishers start building inventory from the end of the second quarter and into the third to keep up with the sharp sales surge starting November every fiscal with festivals across the globe also coinciding with the Chinese New Year, it said. That has not happened this financial year as the industry was focusing on clearing its already stocked-up inventory.