The Gem and Jewellery Export Promotion Council and other leading associations have directed members to halt import of rough diamonds for two months from October 15, amid a steep rise in inventory of polished diamonds due to a sharp fall in exports.
Halting the import of rough diamonds will help the industry balance demand and supply, thereby protecting the value of assets and increasing consumer confidence, according to a statement from the industry bodies.
They have decided to review the situation in the first week of December.
Large markets slow down
Demand for loose polished diamonds and jewellery from large consuming economies such as the US and China has been affected over the last many quarters and fresh orders have slowed down.
The overall export of gems and jewellery dipped 27 per cent in the five months this fiscal to $12.06 billion (Rs 99,293 crore) against $16.55 billion (Rs 1,29,234 crore) in same period last year, according to GJEPC data.
Cut and polished diamond exports declined 30 per cent so far this fiscal to $7.03 billion (Rs 57,844 crore) against $10.08 billion (Rs 78,693 crore) last year.
Subsequently, inventories of polished diamonds have increased over the past few months and prices have softened.
Benefits of voluntary ban
Mining companies have been flooding rough diamonds into the market despite the fall in demand.
Colin Shah, Managing Director, Kama Jewelry, said that with the concurrent downtrend in diamond exports for the last several quarters and the softening of prices, the voluntarily ban on diamond imports will help diamond traders, especially the small and medium-sized ones, to ease their inventories and derive a fair price.
The diamond industry has imposed voluntary bans in the past to bring stability in the overall demand-and-supply dynamics and foster economic growth of the country through robust exports. This may have some impact on the Indian diamond polishing business in the short run, but will eventually benefit the industry in the long run, he said.