India Diamond Trade Bolsters - Yet Short of Pre-crash levels

According to the Gem & Jewellery Export Promotion Council (GJEPC), India's polished diamond exports rose 73 percent year on year to almost $1.8bn in May and the polished imports rose 68 percent during the same period to $984mn for the month. The rough imports were up 55 percent in May to $978mn; similarly, the rough exports rose 56 percent year over year to $78mn, giving India net rough imports of $900mn, up from the $541mn it posted in May 2009.

The available figures indicate that the Indian diamond industry along with other major diamond trading nations is gradually recovering from the shattering effects of global economic crisis. Though the country was able to make some progress on export front in the month of May, it is still significantly short of the 2008 level of $2.55bn in the same month on polished diamond exports. Besides, India still has a polished export deficit of $864mn for the first five months of 2010, up from the deficit of $430mn it posted a year ago.

However, it is not clear whether India will be able to put the past trade record on track as major procurement sources have become susceptible to stiff competition. The latest developments in Zimbabwe and China ties signal that the latter is making inroads in obtaining diamond mining rights from some African countries including the former, to nudge India from the African procurement zone.

China is planning to augment its diamond polishing sector, which only produced $3bn in exports in 2009 as compared to India's $17.5bn. It seems a fight is brewing between the world's two fastest growing economies, China and India, to lay claim over diamonds of Africa.

According to sources, a deal has been struck between Zimbabwe and the Chinese government to supply weapons in exchange for a steady supply of diamonds. Moreover, some reports claim that Zimbabwe’s government is secretly giving mining permits to soldiers of the Chinese military, challenging the Kimberly Process, which promotes the mining and production of conflict-free diamonds.

By Jose Roy