Despite the shock from the 2018 Nirav Modi scam, the Indian diamond industry is expected to grow at a healthy 3% in 2019, says a report.

According to the Global Diamond Report 2019, the Indian diamond jewellery market declined 1% in 2018 following rupee depreciation and the bankruptcy of Gitanjali, a prominent jeweller promoted by Mehul Choksi, Nirav Modi’s uncle who fled the country.

However, sales are expected to grow in 2019 due to increased customer confidence, rising working women population, and a shift in preference from occasion-only to everyday jewellery, says the report, prepared by Antwerp World Diamond Centre (AWDC) and Bain & Company.

The Indian diamond industry is yet to fully recover from the impact of the Nirav Modi scam. The peculiar nature of India’s diamond trade is such that when big fishes run into trouble, mid-sized ones too suffer; some of them are pushed to the point of extinction. “In 2019, access to affordable financing became even more challenging for mid-sized players,” says the report, adding financing for mid-sized players globally fell by 30% ($5 billion) since 2013, crippling the ability of manufacturers to grow operations. “While traditional diamond banks curtailed their exposure to the sector, Indian banks adopted a more conservative approach following the poor performance and challenges of the Indian financial sector at large,” it points out. As a result, cutters and polishers reduced rough diamond purchases by 30% to clear inventory and improve their cash flow. All this at a time when luxury spending draws higher taxes, gold prices are rising while the rupee is weakening.

After a period of mild growth through 2017 and 2018, the global diamond industry has struggled to maintain buoyancy in the first three quarters of 2019 due to falling consumer confidence and geopolitical uncertainty. Despite short-term challenges, Bain & Company believes the outlook for the diamond market remains positive in the long term. In volume terms, rough diamond supply growth is projected to be -2% or 0% annually. However, demand for mined rough diamonds is expected to recover, either staying flat or growing up to 3% annually through 2030.

Mehul Choski

Global diamond industry will rebalance and grow in 2021: Report

What’s Choksi smiling about?