Home Latest News Covid-19: Domestic diamond industry expects revenues to drop by 20-25%

Covid-19: Domestic diamond industry expects revenues to drop by 20-25%

With the epicentre of the Kovida 19 pandemic shifting from China to the United States and Europe, revenues for the domestic diamond industry could fall to its lowest level in a decade in fiscal year 2021, CRISIL said. The United States and Europe are the main export destinations for the Indian hard diamond industry. The diamond processing units are now waiting impatiently for a financial package from the banks, without which they cannot open the units, even if the blockade is lifted.

The industry is waiting for a boost from the banks in the middle of a test scenario, said Colin Shah, vice president of the Precious Stones and Jewellery Export Promotion Council (GJEPC), adding that the industry expects a 20-25% drop in sales for fiscal year 21. Despite the approval to open processing facilities in Gujarat, the industry did not start production for reasons of profitability.

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Outstanding bank loans to the gem and jewellery sector decreased by 16.8% in February 2020, after 2.6% growth a year ago. That said, a banker with experience in the diamond industry: Due to the global recession and the unrest in Hong Kong, they have been cautious in the gem and jewellery sector for the past 20 years. Locking is a new addition to the subject, making them cautious of the industry.

Figure According to CRISIL, diamond cutting revenues in India will fall to the lowest level of the decade, 13-15 billion US$ in FY 2021, compared to estimates of 24 billion US$ in FY 2019 and 19 billion US$ in FY 2020. Exports to these two regions (the United States and Europe), which together account for more than 45% of India’s polished diamond exports, fell by 41% year-on-year in February as the pandemic deepened. It has dropped further, partly due to the national blockade since mid-March.

Exports to other markets have also suffered. In Hong Kong and China, which account for around 45% of exports, demand for luxury goods such as diamonds, jewellery and watches is estimated to have dropped by 79% in February and even more so since then. Assuming that the pandemic starts to calm down by June and that the commercial channels normalise in the next quarter, CRISIL expects the recovery in demand to continue during the second half of the fiscal year.

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Analysis of factors influencing the capture of data from the valuation portfolio of 114 polished diamond exporters, representing more than 30% of the sector.

Stocks are estimated to have increased by 15-20% in the March quarter. As the pandemic affected all major world markets, prices fell by an average of seven percent in March 2020 as a result of various sophisticated cuts. This means a probable inventory loss, says Subodh Rai, senior director of CRISIL Ratings.