India-China border flare-up can hit exports: Diamond traders

India’s gem and jewellery exports plunged nearly 84% year-on-year in April-May owing to the trade disruption caused by Covid-19 while the fall in exports of cut and polished diamonds was more than 79%. The unrest in Hong Kong over its ties with China exacerbated the crisis by curtailing retail sales of diamond, said traders.

Diamond traders said an escalation of India-China border tension can hit exports further as China and Hong Kong together account for 35% of diamond shipments from India.

India’s gem and jewellery exports plunged nearly 84% year-on-year in April-May owing to the trade disruption caused by Covid-19 while the fall in exports of cut and polished diamonds was more than 79%. The unrest in Hong Kong over its ties with China exacerbated the crisis by curtailing retail sales of diamond, said traders.

“The outbreak of coronavirus globally and the trade war between the US and China had affected India’s diamond exports in 2019-20. Now the stand-off between India and China is making us more worried about export prospects in FY21,” said Vipul Shah, vice-chairman, Gem & Jewellery Export Promotion Council (GJEPC).

India’s overall gross exports of gems and jewellery in the first two months of this fiscal stood at $572.18 million (Rs 4,328.54 crore), down 83.68% (82.31% in rupee terms) from $3,506.04 million (Rs 24,468.11 crore) a year ago, according to the GJEPC data.

Exports of cut and polished diamonds during this period amounted to $389.07 million (Rs 2,943.18 crore), down 79.17% (77.42% in rupee terms) from $1,867.65 million (Rs 13,033.41 crore) a year ago.

“Exports have been affected due to the lockdown globally. There have been signs of demand recovering in China, Australia and Europe. Large parts of the Gulf and the USA are still in turmoil due to the Covid-19 pandemic,” said GJEPC chairman Colin Shah. “The industry is recovering slowly but surely with all the safety norms. The industry will recover faster if there is credit availability and quicker progress is made on the ease of doing business.”

Mavji Patel, managing director of Kiran Gems, a diamond exporter, said that if the India-China stand-off escalates then it will have an impact on India’s diamond exports to the region. Patel has offices in both China and Hong Kong. “In the past two months the local market in China was doing good. Chinese people were buying GIA certified diamonds above 30 cents in size. Now if the situation worsens, then it will have an impact on diamond purchase by the Chinese. Also, tourists are not visiting Hong Kong, which is impacting sales of diamonds too,” he said.

Diamond miners who sell rough diamonds to India’s diamond traders are worried too. “As of now, there is no impact. But if the situation worsens, it will eventually impact sale of rough diamonds to India,” said Jim Vimadalal, director at Russian miner Alrosa’s India office.

Courtesy: Economic times.