Last Updated : 19 March 2010 at 03:40 IST

Diamonds sparkle in Surat again

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SURAT (Commodity Online): A year ago, diamond polishing in Gujarat were struggling to stay afloat because of the recession impact. Demand from US had slumped to almost nil and diamond units were closing shops in hordes. Lakhs of people lost jobs.

But, things are changing fast. Surat’s diamond cutting and polishing industry is shining once more. The number of polishers employed in the industry and its output are once again at pre-recession levels.

Demand for diamond jewellery from the US, which accounts for more than half of the global sales, has improved and export of polished diamonds (in volume terms) increased by 44% between October 2009 and January 2010 (provisional numbers), compared with that in the corresponding period of the previous year.

The rebound in demand, which is also supported by restocking by retailers that were operating with minimal inventory in 2008-09 is sharper than expected.

Most of the workers, who had left the industry either on their own or because they were laid off, have come back. Diamond units in Surat had employed as many as 4.5 lakh workers before recession struck. But, in early 2009, the number of workers in the industry had declined to half. Now the industry is back to the pre-recession levels.

Industry experts said the return of workers had led to the reopening of hundreds of small diamond units in Surat, Ahmedabad, and other places.

As of now, the diamond units in Ahmedabad employ around 80,000 polishers, which is slightly lower than the number (one lakh) employed before recession. However, industry experts say that the number of workers is increasing and is likely to return to earlier levels in four to six months.

In addition to the weak economic environment, maintenance of low inventory levels by retailers, in anticipation of a further demand slowdown, added to a sharp fall in exports.

Players operating in the value-added jewellery segment, which has higher margins, weathered the downturn well because of their higher ability to absorb losses.