India's diamond exports likely to prosper, retail demand to stay muted

NEW DELHI (Scrap Monster) : With the Indian currency plunging to new lows against greenback, the large scale Indian diamond manufacturers supplying export market stand to gain. The wholesale and retail jewelers having to pay more for the dollar-based product material are seeing no sudden change to the present situation as long as the currency continues its journey through lower troughs.

India’s diamond manufacturing sector is certainly not exempt from the challenges that the weak currency presents. With local bank credit provided in rupee terms, already expensive rough diamonds have appreciated by 17 percent for leveraged Indian buyers, when accounting for the foreign exchange translation alone. Many small-to-medium sized manufacturers who supply the local market have either shut their factories or shifted their base to polished diamond trading instead.

However, larger manufacturers with access to dollar financing, and who are supplying the export market, seem to be reaping the benefit. Labor costs in dollar terms have sizably reduced. As a result, India presently has a competitive edge in jewelry manufacturing. As long as they’re financed in dollars, and buying and selling their diamonds in dollars, their rupee costs have come down.

The domestic diamond jewelry demand has slumped in the recent months, mainly on the back of the free falling rupee which has escalated the cost of living. The consumer confidence has eroded. According to industry experts, fears of economic growth slowdown may continue to keep the retail jewelry market subdued in the near to medium term.