In addition, there remain regulatory difficulties that limit consumer spending on products such as jewelry

There was a feeling that liquidity in the Indian diamond and diamond sector improved. This does not mean that credit has flowed again, it is not. Instead, sharply cutting the purchase of diamonds, cutting costs and collecting "hung" debts on accounts for diamonds, diamond producers are now just less concerned about cash flows than questions of demand and profit rates.

Ironically, at the recent Indian International Jewelery Show India International Jewelery Show (IIJS), diamond manufacturers experienced an uneasy feeling, watching the crowds of local visitors rushing past them and rushing into the gold jewelry section.

Undoubtedly, diamantaires in fact understand that in the long run the prevailing more stringent credit requirements will have some effect on their industry.

The total volume of loans currently granted by Indian banks to this sector is about $ 7 billion, local lenders and trade participants reported. This is almost 20 percent less than a year ago and basically reflects a noticeable decline in activity in the market. Most importantly, large lending institutions do not offer new loans, which makes the work of small and very small companies very difficult.

In response, banks simply require more stable balance sheets from their existing customers to maintain their existing credit lines. Lenders say that the industry has become more mature as a result of the crisis, and they are confident that the loans they have provided will not be directed to other investments, for example, to real estate. However, this causes concern among a number of large diamond producers.

The fact that Indian banks have become more cautious is good for the industry, as earlier light loans have prompted diamond producers to spend too much on diamonds. This situation allows other smaller banks to join this business. And although their readiness for this can not be checked in the current market with low volumes of diamond purchases, it is hoped that they will take far-sighted steps that will limit speculation on diamonds when the market again improves.

Adaptation to weakened demand

The diamond production levels fell by about 30-40 percent compared to the previous year, as production volumes were reduced to match output levels and weakened demand.

Some have moved from the production of their regular products to the release of more demanded diamonds weighing 1 carat and larger. They also focused on smaller diamonds and lower quality, which are much cheaper to produce, in order to maintain the work of the factories and provide employment for workers.

As expected in such an environment, diamantaires anticipate an increase in the reduction of workers in Surat. Redundancy is not a simple matter for the local industry, which has a glorious tradition of maintaining employment levels even in times of deep crisis. As one sightholder noted, companies would cut diamonds much more significantly if they did not have a great sense of social responsibility. But many warned that if current market conditions continue, they will have no choice.

Although there are still no large-scale layoffs in Surat, the workers have already suffered there. Several bankruptcies led to the loss of jobs. And it should be noted that most workers do not have a fixed salary. They get paid depending on the number of processed stones. Consequently, as production volumes and the transition to cheaper stones declined, their productivity and income fell.

Indians should be sold to Indians

During the global crisis of 2008-2009, domestic demand for diamond jewelry gave the Indian diamond industry an edge over other centers of trade and production of diamonds. This was a great success for the industry, which was maintained through local sales, while other markets were experiencing difficulties. The economy of India quickly recovered from the crisis and was able to achieve a record growth of the gross domestic product by 11.4 percent (growth in the first quarter of 2010).

This did not happen during the current crisis in the diamond and diamond industry, as the Indian economy is experiencing some growth sickness after the euphoria that followed the elections last year. "Do it in India", a new government campaign, is designed to make India a factory for the whole world and should benefit the diamond and diamond industry. But, as one diamantair explained, they did not see significant incentives, for example, special tax breaks or improvements in the structure of the labor force, which would stimulate further investments in production.

In addition, there remain regulatory difficulties that limit consumer spending on products such as jewelry. For example, consumers continue to be required to declare purchases in excess of $ 7,800 (INR 500,000), setting a restrictive ceiling on their purchases for cash. The industry has succeeded in protesting against the government's previous attempt to reduce this ceiling to $ 1,500 (INR 100,000).

Such restrictions can become a brake on sales volumes during the Diwali holiday in November and the subsequent wedding season, despite the growth in demand for gold, which was noted during the IIJS exhibition. This is especially true in rural areas, where buyers do not have credit lines and are eager to spend money on gold jewelry and related goods at current prices.

Yet Indian diamantaires have the possibility of long-term growth in the local market. Numerous young generation departs from traditional heavy gold jewelry to everyday jewelry. And the culture associated with diamond wedding rings is developing more and more, where marriage was the norm at the choice of the parents of the bride and groom, in which there are no proposals in the Western style. The industry can and should benefit from these trends.

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