World’s largest diamond industry faces unemployment issue post import duty hike in India

• One in every five diamond worker in Surat may lose his job because of weak market trends.
  
• The unemployment issue arises due to the import duty hike by the central government to narrow current deficit account.
  
• The industry was already struggling with low global demands and Asian currency fluctuations lately.

The recent move by the central government to hike import duty on 19 non-essential goods to boost ‘Make in India’ is adversely affecting the world’s largest diamond processing centre in Surat - which exports 95% diamonds globally. One in every five diamond workers may lose his job in the coming six months.

Following the increase in import duty, the Indian diamond industry lost its dominance over the global market. The global business traders are now looking at China and Thailand to cater to their demand.

The unemployment challenge comes in with a weak demand for diamonds in the global market due to the US-China trade war. Surat’s diamond industry - which employs over 4.5 lac workers is likely to lose around 1 lac job in the next two quarters.

In order to absorb the widening current account deficit and deal with currency devaluation, the Indian government raised the import duty levied on cut and polished diamonds from 5% to 7.5%. The import duty hike has just added more misery to the diamond industry which was suffering from slow overseas demand, liquidity crisis and weak trends of Asian currency.

Import of cut and polished diamonds have plummeted to ₹5,289.35 crore in FY 2018 which is 32% less in than the previous year. The industry was also negatively impacted by the Nirav Modi scam and that has made it difficult for the industry to balance liquidity. The companies do not have sufficient funds to ensure their sustainability either.

This is not the first time that a decision made by the Modi-government has had an adverse impact on the diamond industry. Earlier, the industry was struggling because of the ban levied on the use of 500 and 1,000 currency notes in India.

Surprisingly, despite India marking its presence among the top 100 economies when it comes to ease of doing business, the traders working at Surat’s diamond manufacturing unit have not been having the best of runs.