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3War threatens to take sheen off Indian diamond industry, says Crisil

  • Published
    9th Mar, 2022

Sanctions imposed by the United States and European nations on Russia in the wake of its aggression on Ukraine is likely to have a direct impact on the Indian diamond industry.


About the Indian diamond industry:

  • The Indian diamond industry is deemed to be strongest in terms of its production and processing capabilities.
  • India is the world’s largest cutting and polishing center for diamonds, accounting for over 90% of polished diamond manufacturing globally.
  • This is attributed to factors such as the easy availability of high skilled labour, cutting-edge technology and lower costs
  • It contributed around 19% share in the world’s total exports of diamonds during 2019 and became the top exporting nation for cut & polished diamonds across the globe, according to the ITC trade map.
  • As of February 2021, India’s gold and diamond trade contributed ~5% to India’s Gross Domestic Product (GDP) and 14% to India’s total merchandise exports.
  • The Government has permitted 100% FDI in the sector under the automatic route, wherein the foreign investor or the Indian company do not require any prior approval from the Reserve Bank or Government of India.
  • Market size: In FY21, exports of gems & jewellery stood at US$ 25.30 billion. 
  • The Government of India is aiming at US$ 70 billion in jewellery export in the next five years (until 2025), up from US$ 35 billion in 2020.

Impact of Russia-Ukraine crisis on Indian Diamond Industry:

  • Russia's biggest diamond miner Alrosa supplies about 30 per cent of the rough diamonds globally and is a critical source for India.
  • Rating agency Crisil in a note said sanctions will have a bearing on growth of the diamond industry.
  • The sanctions have severed Russia's central bank and two major banks from the SWIFT system.
  • While they do not prohibit business with Alrosa, trade settlement has become difficult, which could lead to supply disruptions.
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