The diamonds business has begun to sparkle again: to an extent despite the continuing spread of the virus—but substantially also because of it.
In ways hardly expected at first, the Covid sweep across the world last year proved good for diamonds. Past a difficult spring of 2020 through the first wave of the virus, the diamonds business has sprung back to see rising demand and improved prices.
Diamonds have long been celebrated as a woman’s best friend, not a virus’s best friend. But diamonds have long found a way to shine through the gloom. The diamonds business has begun to sparkle again: to an extent despite the continuing spread of the virus—but substantially also because of it.
Not least, the revival has brought work back to the diamond cutting and polishing centres in Surat and around.
The revival is a particularly happy story for India and for Indians. About eight in ten diamond sold around the world are cut and polished in India. The wholesale market in roughs out of Antwerp in Belgium is mostly in the hands of Indians. The more diamonds America, Japan and Western Europe buy—the traditional big markets for diamonds—the better for India.
“We were very worried early spring, summer,” Baron Dilip Mehta, Chairman Emeritus, Rosy Blue—honoured with the title of baron by the Belgian government—tells CNBC TV-18. “We had nothing to do for three or four months, we were paying our salaries and our people, we needed to make sure everybody is ok, but we had no productivity. So the cost of doing business based on the turnover was very high. But of late we have demand which is pretty good. Business in America has been very good because retail there did very well in the second half.”
That it did because the virus obviously didn’t kill love. People still married—if in a less crowded way. With less to spend on parties, there was more to spend on diamonds if anyone so chose—and many clearly did.
“There was a lot of emotional connect people made during the lockdown period,” says Mehta. “And in the second half of last year, people were feeling more free to go about and do things. And here jewellery fared quite well compared to travel and hospitality.” The diamonds business, he says, found the “good fortune” of taking a share of budgets for hospitality and travel.
In India, Diwali brought the light back into the business. Indians, forever ready to spend savings on jewellery, also diverted some of the travel and hospitality budgets into gold and diamonds.
“Most retailers in India did fairly well over the festive period,” Dipu Mehta, MD Orra Jewellery, tells CNBC-TV18. “India was just coming out of a lockdown. So there was a pent-up demand. Gold was relatively stable, there was no spending on other luxury items. So a lot of that spending came to jewellery.”
Low production gave dealers a chance to move static stock. Now the late spurt in demand has raised prices. A degree of shortage has arisen “because not too many factories were working in India,” says Dilip Mehta. But that has also “helped industry to clean up.”
This year will be remembered “as a clean-up year for the industry where they were able to sell their dead stock and clear a slow-moving inventory,” Mehta says. “Retailers too sold what they had in the stores. So both wholesale and retail will see a very light pipeline going into 2021. The cash flows are now much better.”
In India the government has been able to handle a tricky situation effectively, says Dilip Mehta. “In September we were wondering why the Modi government is not putting money into the economy. But with hindsight, I think they’ve done a very smart thing. We were up against the headwinds, and now we’re going to have a tailwind, with a lot of American money to go around the world. The government is using the present opportunity now to give a new impetus to growth.”
The workers are now coming back to the cutting centres, the dealers are back in business, the business is back. That looks a lot brighter than anyone might have guessed in the spring of 2020.
(Edited by : Ajay Vaishnav)