US Government Shutdown to Hit Indian Diamond Exports

The partial shutdown of the US government is likely to have had additional negative impact on exports of small diamonds from India to the US in a financial year that saw an 8.48% decline from the year-ago period in the first nine months to $22.41 billion. We are yet to assess the entire impact of the US shutdown on exports,” said Colin Shah, vice chairman, Gem & Jewellery Export Promotion Council (GJEPC). “But impact will definitely be felt on consumption of smaller diamonds that are generally purchased by middle-class US citizens who have been affected by this shutdown.”

The Congressional Budget Office has estimated that the shutdown, which was lifted on January 25 after a record 35 days, cost the American economy at least $11 billion. The shutdown stemmed from an impasse over President Donald Trump’s demand for $5.7 billion in federal funds for a US-Mexico border wall.

Vipul Shah, a diamond exporter, said the US-China trade war has also impacted movement of loose diamonds from India to China. “Exports of diamond jewellery from China to the US have slowed down. Demand from the Far East is very less now, which is also impacting Indian exports.” In the nine months to December 2018, exports of cut and polished diamonds from India fell 13% to 22.89 million carats.

Shah said the high import duty on cut and polished diamonds as well as on cut and polished gemstones is also hurting the trade. “It is currently 7.5% and it should come down to the earlier level of 2.5%. If this continues, then a portion of the trade may shift to our competitors such as Belgium or Israel,” he said.

As exports are not picking up, diamond traders are trying to reduce the cost of transaction to improve their margins. “We have asked the government to amend income tax regulations enabling foreign mining companies to sell rough diamonds through Special Notified Zone in Bharat Diamond Bourse,” said Shah.

The GJEPC vice chairman said the council has sought introduction of presumptive taxation system for diamonds and gemstones in India. “The introduction of presumptive taxation would not only increase the ease of doing business of diamantaires but also encourage diamantaires from across the world to start operations in India as against other preferred destinations such as Belgium, the UAE and Hong Kong. A level playing field in India is absolutely essential for making India a global hub for gems and jewellery,” he said.

(Courtesy: Economic Times)

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