Diamond Industry

AProject report

On

(INDIAN DIAMOND INDUSTRY)

for

(CENTRAL BANK OF INDIA)

In partial fulfillment of the requirements of

the Summer Internship of

Post Graduate Diploma in Business Management

Through

Rizvi Academy of Management

under the guidance of

(Mr.H.K.NAIK)

Submitted by

(AKSHAY V SALUNKHE)

PGDBM

Batch: 2010 – 2012.

Page 1

INDEX

Sr.No. TOPIC Pg NO.

1) Executive Summary 3-4

2) Introduction 4-5

3) Industry Overview 6-10

4) The Diamond 4C’s 10-11

5) The Diamond Supply Chain 12-13

6) Structure, Size and Growth of the Indian Diamond Industry 14-19

7) SWOT Analysis of the Indian Diamond Industry 20-21

8)IN DEPTH: Indian Diamond Industry

20-21

Page 2

INDIAN DIAMOND INDUSTRY

Executive Summary:

The Indian diamond industry thrives in the atmosphere of secrecy and informality that envelops

the diamond trade and has for long been labelled as an unorganized sector of the economy.

However, it resembles a close-knit community composed of thousands of small, medium and

large sized CPD (cut and polished diamonds) units and has grown to become one of the highest

foreign exchange earners for the country. The industry exports cut and polished diamonds worth

US $ 22 billion annually and enjoy a 93 % market share of the global exports of cut and polished

diamond pieces. An in-depth study of the industry reveals that the so called unorganized sector is

in fact highly organized and has great potential to offer useful insights to the field of

management in terms of new forms of organizing, networking, business processing and for doing

international business. It includes insights about the remarkable rise, growth and the unique

working of the industry The Indian diamond industry received significant attention in the media

recently because about a hundred thousand workers lost their jobs in Nov 2008 when panic

followed due to the impact of recession. While we acknowledge the sensitivity and gravity of the

issues and the need of reforms to address them, this paper is an attempt to draw useful insights

for the field of management with a balanced perspective on the industry. Due to the manner in

which the Indian diamond industry has organized itself and grown, coupled with the kind of

signals of recovery which have followed after the severe recession, we believe that this success

story of long waits to be documented in the business management literature.

Diamond is an 'export-led' and 'value added' industry. The industry depends entirely on imported

raw material, namely, rough diamonds, generally referred to in trade parlance as “roughs”. The

diamond exporters have developed a global outlook, as theirs is an export-oriented and import-

dependent industry. In order to excel, they have to overcome necessarily competition from

manufacturing and cutting centers in other countries. India is the biggest diamond cutting and

polishing centre in the world. Our study revealed that a few enterprising Indians who went to

Antwerp agreed to bring to India the left-over’s of diamond rough for polishing.

These were very small pieces of diamonds called as ‘grains of sand’ in diamond terminology.

The entrepreneurs from Gujarat in India, utilized this opportunity to develop indigenous methods

of cutting and polishing of diamonds in small factories (CPD units). The finished product, the

Page 3

processed diamond was then exported to the globally centralized trading market which existed in

Antwerp. This was like outsourcing of low-valued diamond rough to an under developed

country in those times. The prices of rough diamonds have increased sharply in the recent times

pushing down margins further. Companies have started to look at more technological advance

process to reduce manufacturing cost, predict future trends & understand supplier buyer demand.

Thus this project will help us to understand how much technology has penetrated in the

unorganized sector & how much more can be done to improve it further.

Introduction

From time immemorial, India is very well known in the world as the birthplace

for diamonds. It has remained the home of diamonds for over two millenniums. It is difficult to

trace the origin of diamonds but history says, that in the remote past, diamonds were mined only

in India. Diamond production inIndia can be traced back to almost 8th century B.C. India in fact,

remained undisputed leader till 18th century when Brazilian fields were discovered in

1725 followed by emergence of South Africa, Russia and Australia. World famous diamonds

such as the Koh-i-noor, The Orloff, The Great Mogul, The Sancy Hope, Florentine, Nassak,

Regent, Pitli and the Nizam etc. were produces of India and many of these world famous

diamonds were recovered from India in 16th & 17th centuries. It is also said that, India was the

sole producer and supplier of diamonds to the world before the discovery of Brazilian fields till

the 17th century and the later emergence of South Africa, Russia and Australia, as major

producers. The success story of the Indian diamond industry is unique. From humble beginnings,

India rose to become the world leader in a span of just two decades. No other export segment of

the country has such a significant share in the world market. It is rightly said, that India has

indeed 'democratised' diamonds, which in the past were the exclusive preserve of only the rich

and famous. This achievement of the Indian diamond industry was possible only due to the

fortuitous combination of the manufacturing skills of the Indian workforce and the untiring and

unflagging efforts of the Indian diamantaires, supported by progressive Government policies.

Page 4

But how did the Indian diamantaires get the diamonds? The answer to this query

lies in the business acumen and core competency of the early Indian diamantaires who migrated

from small towns of Gujarat (specifically Palanpur in Surat and other nearby areas) to

Antwerpen (in Belgium) which was then the diamond hub of the world, a market dominated by

the orthodox Jews of Israel who claimed expertise in the cutting and processing of large

diamonds (sized more than two carats, 1 carat =0.2 grams). The visionary Indian diamantaires

started their trade with the cutting and manufacturing of diamonds of very small sizes, which

nobody was ready to process (less than two carats, especially one carat and lesser) and gradually

made it their core competency, a niche field in which no other country had the mastery in; and

coupled with the lowest manufacturing and labour costs worldwide, India assumed greater

market presence in the global diamond industry.

The area of study of family owned businesses derives its importance from the huge conglomerate

of family run organizations which operate in the diamond industry since many generations (not

only in India, but all the diamond traders globally are family run businesses); the analysis of

which would help to internalize the attributes that have helped them achieve the stupendous

growth. Family-owned businesses play a crucial role in the economy of most countries. Much of

the retail trade, the small-scale industry, and the service sector is run by family businesses.

Worldwide, family-managed businesses employ half the world's workforce and generate well

over half the world's GDP. In the United States, 24 million family businesses employ 62 per cent

of the workforce and account for 64 per cent of the GDP. In India, it is estimated

that 95 per cent of the registered firms are family businesses.

Page 5

Industry Overview

The Global Spread

The diamond industry is truly global. The raw material which is the diamond rough is not mined

in India but in different pockets around the world as in Africa, Russia, Australia and Canada.

This is imported by different countries where it is cut and polished. The global percentage share

by value, of regions and countries which produce rough diamonds and of those which import this

rough in 2009. The finished product has since long been traded mostly in Antwerp, Belgium, and

exported to different parts of the world, the major consumer being the USA.

The Incredible Growth

Gradually, over a span of four decades, there was an increase in the size of the industry, and in

the number of CPD units in India. The secrets of this business were shared with and restricted to

the members of a local community in Gujarat. The community members were largely simple,

religious and possessed very little formal education. Personal discussion revealed that those who

were interested in going to school were attracted towards diamond business and dropped out of

studies. In spite of absence of management education, unique management styles and

organizational skills were developed. They tirelessly worked on upgrading the skills of artisans

as well as on the techniques of diamond processing. As these Indian firms (CPD units) increased

in size, they moved up the value chain and set up their own trading offices in Antwerp. After

creating a niche in the diamond arena with small diamonds, some of these units developed skills

and technology for cutting and polishing larger stones and fancy cuts. Improved technology and

product quality helped ‘insourcing’ of higher valued raw material, the larger sized diamond

rough to India. The firms eventually developed a worldwide marketing network of global

suppliers and clients on their own. The entire process, by the dawn of the 21st century, led to a

shift in the global production base of diamonds to a country which by now had transformed into

an emerging economy. On Aug 1, 2005, the Financial Express reported, “The Indian gems &

jewellery (GJ) industry is one of the most important segments of the Indian economy.”

“About 12 lakh people out of the total of 38 lakh population of Surat city earned directly or

indirectly from diamond industry in 2006”, said a local industry report. The enterprising Indians

were successful in leading the remarkable growth of the CPD industry from 0.12 billion US$ in

1975-76 to 14 billion US$ in 2008-09.

Page 6

Networking of CPD Units

Different categories of CPD units are equipped to cater to cutting and polishing of different

categories of diamond rough. Often, the large CPD units have subsidiaries and outsource the

smaller and lower quality rough to the smaller CPD units. Discussions revealed that the imported

diamond could pass through different channels before being exported. It is possible for a large

manufacturer to directly import, process and export the diamond. The medium sized CPD units

may depend on the traders and brokers who are involved in the intermediate buying and selling.

There are several small units at the lower end of the chain which participate in the Heera Bazaars

to collect their share of the diamond rough for polishing.

A Unique Transactions System

Trading across various levels between importers, exporters and manufacturers is carried out

through thousands of brokers on open streets in markets called ‘Heera Bazaars’. Diamond

packets worth millions of dollars continue to exchange hands without formal receipts in such

There are Heera Bazaars located in different parts of the state of Gujarat which cater to the

nearby CPD units. The rough diamonds as well as the polished ones are traded here. It appears

impossible to track and account for the exact number of such transactions or the number of

people involved in them, however, they seem to be well-connected to the industry network and

are engaged optimally to produce the overall output of the industry.

The transaction of diamonds is carried out through special mechanisms. The transportation of

diamond packets, both rough and polished, is largely done through angadias. Angadias are

people, members of Unja Patels ,a local community who have specialized in carrying diamonds

safely within the industry for a period of over four decades and have achieved trustworthiness of

the highest order. There are often no written contracts, many transactions occur in cash, and

stones worth millions of dollars are transported with virtually no security. The angadias could

also be carrying these diamond packets in their pockets & travelling in economy class of train.

The whole industry they say works in trust.

Page 7

Online portals & their Impact

RapnetThe Rapaport Group is an international network of companies providing first class, added value

services that support the development of free, fair, efficient and competitive diamond and

jewelry markets. Established in 1976, the Group has over ten thousand clients in 70 countries.

Group activities include publishing, electronic information services and trading networks,

diamond grading and certification, global trading and auction services, consolidated international

shipping, international sourcing, quality control and compliance services, financial, research and

marketing services.

A primary and unifying focus of the Group are knowledge based information

services that create transparent and efficient markets. Examples are the

Rapaport Price List and Rapaport Magazine, the RapNet – Diamond Trading

Network, GIA LabDirect diamond grading and certifications services and the

Rapaport Fair Trade Jewelry initiative. The publishing division is best known for its Rapaport

Price List. Established in 1978, the Report is the industry's primary source for diamond price and

market information. The Diamonds.Net internet portal supports our 24/7 Rapaport News Service

as well as RapNet, the world’s largest diamond trading network with daily diamond listings of

525,000 diamonds valued at over $4.12 billion. While the Group provides extensive trading

services to our clients, we do not trade diamonds for our own account. The most important

strengths of the Group include our dedicated team of over 100 highly skilled professionals,

sophisticated information and data management technology, global reach, independent

perspective and total commitment to providing our clients with consistent first class service.

Page 8

Information That Means BusinessInformation is the key to your success in the diamond business. You need the best price,

availability and market information to trade diamonds. You need honest information from

someone that is not afraid to tell it like it is. Rapaport is your best source of information.

Rapaport is the international standard for diamond prices. Our 24/7 global news network, market

reports, in-depth articles and diamond trading data take you inside the market in real time,

online. Rapaport does not just tell you what is happening. We explain why it is happening and

how it will impact your business.

The Rapaport Diamond Report is the primary first-hand source of diamond pricing

information. Rapaport sets the standard for establishing inter-dealer prices in the diamond

market. Buy and sell better diamonds at better prices. Buyers and sellers deal directly with each

other without any middleman commissions. RapNet connects all players in the diamond industry

from primary cutters to downstream retailers. RapNet is fully supported by the Rapaport Group.

Membership includes direct trading privileges, real-time access to Rapaport prices, news and

analysis, subscription to the Rapaport .

Benefits: Real-time 24/7 access to the global diamond markets.

The best diamonds at the best prices from the best suppliers.

Buyers and sellers deal direct. No commissions.

Real time patented Best PriceGrid technology provides the best price information in the

world.

Customized search engines that let you select exactly the type of diamonds

you wish to buy.

Diamond Listing Service allows sellers to control who gets their data and

allows seller’s qualified buyers to efficiently download diamond listings to

their websites.

Online real-time access to Rapaport prices, news and analysis.

Weekly online access to Rapaport Price List updates.

Page 9

RapNet is the global diamond market most suitable for professional diamond dealers who are

experts familiar with traditional terms and conditions of the international diamond markets. It is

the ideal market for buyers and sellers who wish to deal directly with each other. RapNet

provides excellent opportunities for buyers and sellers to get to know each other and build long

term direct relationships. Sellers post electronic listings of diamonds for sale by uploading files

to the RapNet database. Files with sell listings can be uploaded at any time in a variety of ways.

RapNet buyers search for diamonds on the internet. The search engines allow buyers to easily

specify what they are looking for and obtain listings of diamonds that can be sorted by the best

prices. Buyers can also post specific buy requests which sellers can respond to with offers of

diamonds for sale. Information is the key to your success in the diamond industry. Pricing,

availability and market information provides jewelers, dealers and manufacturers with a critical

edge in the complex and competitive diamond, gem and jewelry marketplace. The Rapaport

Diamond Report provides you with all the information you need to buy and sell better. Rapaport

is your key to increased efficiency and higher profits. Rapaport tells you what is really going on

in the diamond industry and what you can do about it. We identify the challenges and the

opportunities. The Rapaport Diamond Report is the primary source of diamond pricing and

market information for the diamond industry. It is the international standard used to establish

prices in all the major cutting centers and dealer markets.

Page 10

The Diamond 4C’s:a) Caratb) Colourc) Clarityd) Cut

Every diamond is unique due to its journey from deep depths of the Earth's volcanic pipes all the

way to its manufacturing, ready to be set on a piece of diamond jewellery. Yet all diamonds have

qualities that all share which allowsus to define and evaluate them from one another, called the

Diamond 4C's.

The First C: Carat - Also known as Carat Weight is the standard unit of weight used for gems.

Each carat (ct.) is equal to 0.200 grams (200 milligrams). Diamonds are weighed to 1/1000 of a

carat (0.001) and rounded to the nearest 100th or point. Gems weighing more than 1 carat are

usually expressed in carats and decimals. A 1.08 ct. stone would be described as "one point o

eight carats" or "one o eight". A diamond that weighs 0.74 ct. is said to weight

"seventy-four points" or a "seventy-four pointer."

The Second C: Color - A diamond color is measured from D (colorless) - Z (light yellow tint)

color grade. We recommend to stay above I color grade for an exceptional diamond color.

People think that diamonds as colorless but true colorless diamonds are extremely rare, in fact

diamonds used in jewelry are nearly colorless with a small tint of yellow or brown.

The Third C: Clarity - Diamond clarity is a measure of a diamond's purity.

Imperfections called inclusions or pique are measured from the highest grade, Internally

Flawless (IF), Very Very Slightly Included (VVS1 or VVS2), Very Slightly Included (VS1 or

VS2), Slightly Included (SI1 - SI3), Included (I1 - I3), to the lowest grade.

The Fourth C: Cut - This refers to the proportions and angles of a diamond's cut. Based on

tested scientific formulas that will give the best brilliance of the round diamond. A very well cut

diamond will reflect light internally from one facet to another, thus dispersing and reflecting

light like several mirrors through the top of the diamond. This will result in a brilliant display of

fire bringing a well cut diamond higher on the Diamond Quality Pyramid.

Page 11

The Diamond Supply Chain

The diamond supply chain is an impressive series of linked steps and markets ending with the

delivery of beautiful gems to the final consumer. Upon being retrieved from a mine, rough

diamonds are immediately manually assigned a Kimberley Certificate Number to track

movement of rough diamonds throughout the world, which are distributed to manufacturers via

the DTC and other producers. Polished diamonds produced by the manufacturers are sent

to the GIA and other laboratories for grading. Ater grading the diamonds is returned together

with a grading certificate to the manufacturer, who then distributes the goods through various

retail channels to the final consumer. In the Diamond industry, many of the current processes

have been utilized for decades and, although they have served the industry well to date, it is

expected that changes and pressures in the industry will mandate existing processes being

updated and modernized through the use of technology and further automation.

RFID In Diamond Industry

RFID has the potential to revolutionise the diamond supply chain. It is anticipated that

technology and automation will be employed at various and numerous points in this supply

chain. The adoption of this technology will occur at different times for different stages and

processes of the supply chain, but ultimately all these technologies will converge, linking with

and between each other to revolutionize the diamond industry supply chain

DIAMOND MINE / DIAMOND PRODUCER

RFID tags applied to primary packaging used to track inventory. Sorting automated and

simultaneous confirmation of diamonds received full tracking of inventory from primary

packaging through sorting to secondary article packaging. Inventory control of each article

immediate inventory control by customer. Viewing record of articles provided to respective

customers reconciliation of what has been taken and/or returned by customer following

Selection

Page 12

MANUFACTURER/DEALER

Inventory management automated and instantaneous stock counts can occur as and when

required identification of all diamond parcels present record all inventory numbers without the

need for manual processes complete and up to date inventory list can be generated as required

Identification inventory numbers can be read immediately once the diamonds are placed onto a

customized RFID reader Retrieval identification of specific parcels is achieved by a handheld

reader

DIAMOND GRADING LABORATORY

Automated certificate database full accountability and visibility throughout the supply chain real

time track and trace of goods avoidance of clerical errors, and reducing time and cost. Improved

billing increased efficiency of processes. Provide non-manual solution for their clients obtaining

and importing all the valuable information from the GIA certificate at the click of a button image

of the GIA certificate that can be provided to customers allow full value of the GIA certificate to

be realized, thus increasing its utility and indispensability

MANUFACTURER

Inventory management automated and instantaneous stock counts can occur as and when

required identification of all diamond parcels present record all inventory numbers without the

need for manual processes complete and up to date inventory list can be generated as required

Identification inventory numbers can be read immediately once the diamonds are placed onto a

customized RFID reader Retrieval identification of specific parcels is achieved by a handheld

reader.

POLISHED DEALER/RETAILER

Inventory control and management due to stock turn of 1.0 – 1.2, inventory management is

essential. Display optimization and real time store mapping due to display driven sales

generation due to absolute requirement to maximise sales/£ invested and sales/metre allocated to

products. Complete stock protection due to high value goods subject to theft. Customer

interaction instantaneous product information to increase conversation rate

Page 13

Structure, Size and Growth of the Indian Diamond Industry

The structure of the Indian Diamond Industry:

The Indian diamond industry, similar to its origin, is based more in the villages, towns and cities

of Gujarat, where most of the processing facilities are installed; the corporate operations of

marketing and finance for all the diamond traders takes place from Mumbai, where all the major

traders have their registered offices. Majority of the diamantaires procure the rough diamonds

from the Diamond Trading Company (DTC, the marketing arm of the De Beers Group, which

mines its diamonds in South Africa), which holds the maximum share of rough diamonds in the

world. The DTC sells its rough diamonds through two channels: in the primary market to

preferred clients called Sight holders, the world’s leading diamantaires, carefully chosen for their

diamond and marketing expertise; and also form a part of the DTC’s Supplier of Choice

program; the remainder of the rough diamonds are sold by the DTC in the secondary market

worldwide. The other companies, besides DTC, supplying rough diamonds (but to a lesser

extent) include Rio Tinto diamonds, Argyle, BHP Biliton and since recently, Lev Leviev

Diamonds. All the rough diamonds supplied by each of the companies mentioned follow the

Kimberley Process Certification as a proof of its purity, identity and place of origin.

Page 14

Marketing in Diamond Industry

The secret to De Beers' success is a marketing campaign that has permeated our culture --

convincing every woman that she should receive a diamond ring from her fiancé and convincing

each groom-to-be to pay "two-months salary" for that ring to show how much his love is worth.

Prior to the 1930s, diamond rings were rarely given as engagement rings. Opals, rubies,

sapphires and turquoise were deemed much more exotic gems to give as tokens of one's love,

according to the book "Twenty Ads that Shook the World" by James B. Twitchell. Twitchell

goes on to describe how De Beers changed the world diamond market. This idea of connecting

diamonds to romance was captured in a brilliant ad campaign begun in the 1940s, causing

demand for diamonds to increase. Surely you've heard the De Beers advertisement that "A

Diamond is Forever." This ad campaign, which was created by the N.W. Ayer advertising

agency in 1947, transformed the diamond market. In 2000, Advertising Age magazine named the

ad campaign the slogan of the 20th century. De Beers infiltrated Japan with the same ad

campaign in the 1960s, and the Japanese public bought into the idea as much as the Americans

did. Later ads by De Beers told consumers to hold onto their family's diamond jewelry and to

cherish it as heirlooms -- and it worked. This eliminated the aftermarket for diamonds, which

further enabled De Beers to control the market. Without people selling their diamonds back to

jewelers or to other people, the demand for new diamonds increased.

Diamonds are the most coveted of all precious gems, as is witnessed by the extremely high

demand for them. While this has not always been the case, diamonds are nonetheless exquisite

gems that go through a long, tedious refining process from the time they are pulled from the

ground to when you see them in the jewelry store. And, while some of the mystique of diamonds

may be gone -- they're just carbon, after all, the diamond will likely continue to be a highly

coveted jewel, because, well, "A Diamond is Forever." But, as the saying goes, beauty often

comes at a price. And, sometimes, that price goes beyond the financial realm. In the next section,

we'll examine some of the biggest controversies in the diamond industry.

Page 15

SIZE AND GROWTH OF THE INDIAN DIAMOND INDUSTRY

Started in a very small way, the Indian diamond industry has grown multifold since the time it

has started exporting. Presented below is a table showing growth of exports over the last 35 years

both in terms of caratage and in terms of value) Also grown has the number of countries India

has been exporting to; today India exports cut and polished diamonds to almost 20 countries

worldwide (refer appendix for the latest export figures), with a growth of 171% over the last ten

years. The industry totally employs 13,00,000 people and coupled with its extensive network and

global presence; the Indian diamond industry is all set to become a global leader.

  Export

Year

Cts

[Millions

]

Rs.

[Crores]

US $

[Millions]

1970-1971 0.53 28.00 38.00

1975-1976 1.00 99.00 118.00

1980-1981 4.15 590.65 703.24

1985-1986 5.41 1,344.25 1,064.75

1990-1991 8.34 4,738.71 2,641.01

1995-1996 19.21 15,500.98 4,661.90

2000-2001 29.91 28,041.80 6,186.70

2004-2005

[Prov.]47.95 50,073.37 11,181.48

Page 16

Present Status:

Despite increase in rough diamond prices over the last year and also issues such as transfer

pricing, excise duty on branded jewellery and the newly introduced value added tax, the diamond

industry has performed very well, especially in the jewellery sector which is the future of the

industry.

Some other basic facts about the Indian Diamond Industry:

Exports of Cut and Polished diamonds form 14% of the total India’s

foreign exports (US$ 11.2 bn out of US$ 78 bn), total gem & jewellery

exports US$ 15.7 bn (2004-05)

World’s largest diamond cutting and processing center:

Estimated workforce – 800,000 skilled craftsmen

60% global market share by volume and 80% by volume

94% of global workers in diamond are Indians

11 out of every 12 diamonds polished pass through Indian hands

50 banks provide US$ 3 bn credit

Manufacturing and sales offices worldwide

Diversified into jewellery manufacturing since 1990

(Diamond Jewellery market inclusive of exports: Rs. 13,000 crores approx.)

Conglomerate of family businesses, thus committed and enterprising

Future Trends in the Indian Diamond Industry

With the exponential growth the industry has achieved over the past years, the future is also

equally bright for the Indian diamond industry. The global presence and recognition for Indian

diamantaires over the years has been amazing, coupled with the positive vibes the Indian

economy (GDP growth, increase in awareness levels) is expecting from the future; India is

surely tending to become the global headquarters for diamond and jewellery.

Page 17

Some of the emerging trends that can be seen for the Indian diamond industry:

Further increases in trading activity, foreign export target for 2007 =US$ 20 bn

o Infrastructure development: 19 more special economic zones (SEZ)

approved (one SEZ specially for Surat –in Gujarat), this would greatly facilitate

export

o Setting up of the Bharat Diamond Bourse (BDB) to centrally locate

diamond trading operations and would greatly benefit the Indian industry

o Diversifying into jewellery using state-of-the art manufacturing facilities

in export/economic zones, special economic zones to provide one-window

clearance

o Great growth curve for the branded diamond jewellery segment, coupled with the

growing levels of consumer awareness; the branded segment is sure to grow;

India’s jewellery market is the world’s fastest growing market

o Value-addition capability and investment in technology would give Indian

diamantaires the real edge

o Joint ventures / Alliances on the rise; indicating a shrink in the distribution chain

and Indian players have started to dominate

o Extensive network of offices worldwide: (US = 1250, Belgium=325,

Bangkok=325, HK=250, Japan=75)

o Changing retail setup, emergence of malls, superstores, hyper markets and

branded stores, to benefit the diamond industry

o Diamond mining to be started in India also (Central and Southern regions)

Page 18

Besides the emerging indicators; the Indian diamond industry also would need to prepare itself

for some challenges that might also emerge in the future:

Emergence of China as a manufacturing alternative

o Greater use of Information technology, the current use if very limited compared to

the other industries

o Need to move from production/ manufacturing orientation to a marketing led

business

o Emphasis on operational and ethical standards to build world class organizations;

more investment in employees required, greater abiding to the DTC’s Best

Practice Principals (BPP)

o Co-ordination amongst all stakeholders –producer, manufactures and retailers to

protect and increase diamond industry reach

o Forward integration into brand building (B2C segment) very much required for all

leading diamantaires

Reduction in credit period, Indian diamantaires offer the largest credit period in t

the world to their buyers

o Growing demands of the single-channel supplier (the DTC), increasing rough

prices

o Saturation of the US & European retail industries, newer markets need to be

tapped

o Productivity levels in diamond processing need to be increased as newer players

like Sri Lanka and Thailand are also entering in the small carat segment

o Investment into greater use of technology, better jewellery designs and into

research and development (of gaining expertise in cutting bigger diamonds as

well)

Page 19

The India diamond industry if able to overcome the above challenges would surely be a force to

reckon with.

SWOT Analysis of the Indian Diamond Industry:

SWOT analysis is the overall evaluation of an industry’s Internal Environment(strengths and

weaknesses), and External Environment (opportunities and threats) to understand the present

status of the company and use it as an aid in strategic planning.

The Internal Environment: The internal environment analysis comprises of the

evaluation of a company’s strengths and weaknesses, with a view to analyse its

current status and the areas where it can correct or strengthen itself.

The strong areas of the Indian Diamond Industry include the large workforce of

skilled craftsmen (about 800,000), lowest manufacturing and labour costs, a

well-distributed marketing network and supportive governmental policies

Weaknesses of the Indian Diamond Industry include areas where it can correct itself, such as

low levels of productivity as compared to places like China, huge stocking of inventory and thus

handling costs and high working capital to be maintained.

The External Environment: The analysis of the external environment is related

to the opportunities and threats that the industry should be prepared for.

The opportunities the Indian diamond industry could utlise include the

growing domestic demand for diamond jewellery and tapping potential newer

markets in Europe and Latin America.

The threats facing the Indian Diamond Industry include the entry of countries

such as China, Sri Lanka and Thailand in the small-sized diamond segment, the

over dependence on single-channel suppliers such as the Diamond Trading

Company (DTC, the marketing arm of the De Beers Group) and most

importantly, the emergence of newer substitutes such as synthetic diamonds

(cubic zircon, HPHT etc.) which are much cheaper than the real diamonds.

Page 20

IN DEPTH: Indian Diamond Industry

The Indian diamond cutting centers are concentrated in Bombay and Surat, a small town about

five hours away from Bombay. Small boys, sometimes as young as 10 years old, work in hot

sheds chiseling roughs which eventually get sold in the fancy shops on Fifth Avenue and Bond

Street. Their nimble fingers and sharp eyes enable them to cut these diamonds

in remarkable shapes, but while they earn well

for these skills many of them find their

eyesight getting progressively weaker as they

grow older.

But India has a large labor force and this has

made the country the biggest diamond cutting

center for small roughs. Indeed, were it not for

Indian workers, many of these small

diamonds would be put to industrial use rather

than jewelry. The Indian diamond trade

generates over 4 billion dollars in exports every year -- this represents an almost 25 percent value

addition to the imports of roughs.

The trade itself is controlled by a handful of companies and families, most of whom hail from the

small town of Palanpur in Gujarat. Many of them are fabulously rich and divide their time

between India, Belgium, Israel and other western countries.

This entire high-skill, high value trade has recently been shaken up by the conflict between the

De Beers-Central Selling Organization (CSO) global diamond cartel, and Argyle of Australia,

one of the biggest players in international diamond trade

Page 21

Diamond cutting and polishing workshop in

Bombay.