Foreclosure Crisis in America Affects Diamond Hub in India
March 18th, 2009
With the world being a global village it is not surprising that as a fall out of the foreclosure crisis in America the diamond hub in India is being adversely affected. The dry up of credit in USA has imposed a forced holiday on the diamond industry in the western part of India, Surat. Since the October Diwali festival holidays not one cutting and polishing unit has opened. It seems that the holiday will now continue to embrace the Christmas and New Year celebrations also.
About 92% of all the rough diamonds of the world are cut and then polished in Surat, a city in the province of Gujarat. Last year it did a whopping business of INR 50, 000 crores. America is the largest buyer of diamond jewellery and is responsible for 60% of the exports from Surat.
In 2007 Christmas, the orders from America were about INR 20, 000 crores. This year orders have come for only Rs.5, 000. This has jeopardized the jobs of 100,000 workers. C.P Vanani the president of Surat Diamond Association said, “The impact of the global financial slowdown is such that not a single trader is seen in the market.”
The dreaded layoffs have started. Many firms of Surat have their set ups in the economic capital of India, Mumbai. More than 10,000 to 12,000 day workers have been given three months leave. In Surat proper 50,000 have been retrenched or sent on a long leave. It is hoped that post Christmas orders will start coming. If the situation continues like this then the leave will have to be further extended lamented Vasant Mehta of Gems & Jewellery Export Promotion Council.
The long arm of foreclosures is touching the 500 big diamond units of Surat. Each has about 5,000 to 10,000 workers. The 3,500 small firms each employ about 100 to 150 workers. The workers earn anything from INR 5,000 to INR 15,000 per month. The head cutter earns each month 60,000 INR to 80,000INR
Previously the Diwali holidays lasted for about a fortnight or so. This week it started two weeks before the festival. Vanani added that there is slim chance that even after Christmas the small units will reopen. The national GDP is 9% while that of Surat was 16.5% until the foreclosure crisis hit Indian shores. While the stock market in India is falling so too are sales with the country feelingthafter shocks of the foreclosure crisis in distant America.
Two local markets opened in Varachha and Mahidharpura but looked deserted and empty with the hustle and bustle of business. Many jewellery firms have downed shutters in USA. Some have failed to pay debts and others have gone back on orders. Jumbo diamond merchants in Mumbai and Surat have turned away from USA and opened office in West Asia, Hong Kong and also Russia.
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