Slowing China knocks out 6 of Surat’s diamond firms; over 5,000 lose jobs

The Chinese slowdown has hit Surat's diamond industry hard. The industry that employs nearly a million people in the country is in dire straits with nearly half a dozen large diamond companies in Surat alone closing down for want of orders.

More than 5,000 polishers in Surat, the country's diamond capital, have lost their jobs since June and thousands more could be left without work, as falling Chinese consumption of luxury goods leave jewellers with unsold stocks of jewellery and gems.

Chinese jewellers are also reported to have defaulted on deals worth millions of dollars.

The China bubble that helped India's diamond capital hit the headlines with at least one major exporter treating its employees to bonuses that include apartments, cars and jewellery, now seems to have burst.

The city that polishes about 80 per cent of the world's diamonds will now have to look to firmer, traditional markets to drive sales, although demand there too has fallen.

China represents roughly a fifth of the global market for polished diamonds in volume terms. But, the market is less than half of the United States in value terms, and accounts for the same proportion of India's $23 billion of annual exports.

Growth of the Chinese market has helped fuel Surat's diamond industry in recent years, as jewellery stores expanded at breakneck pace to cater for luxury hungry consumers.

Diamond jewellery sales in China grew at a compounded annual rate of 18 per cent between 2008 and 2013.

Now, industry executives project growth in single digits, and jewellers are adapting - and cutting back, especially after the stock market crash in June that slowed growth and hurt the wealthy in China.

Also, a crackdown on corruption has meant that the rich are fearful of any ostentatious signs of wealth, and among luxury goods, jewellery has taken a big hit.

Surat also caters to China's demand for cheaper diamonds of below a carat, also known as solitaires.

Distress for Surat's polishing business, which comes at a time of social unrest across the state of Gujarat, Prime Minister Narendra Modi's home state, where hundreds of thousands of members of the Patidar, or Patel, community have taken to the streets demanding an end to caste-based reservations, could exacerbate problems for the Gujarat government and for Modi.

Gujarat's diamond polishing industry, like all other industries, is dominated by Patels, who make up 14 per cent of the state's population.

Jobs are a critical for India's inclusive growth as the government struggles to revive economic growth to a rate that will create employment for millions joining the workforce every year.