India is the world’s largest centre for processing diamonds, with more than 70 percent of the world’s extracted diamonds sent there for cutting. Source: Press photo
There is a sector in the structure of the Russian-Indian trade that could lead to significant increases in turnover, and bring the two countries closer to the long elusive goal of raising bilateral trade to $30 billion by the year 2025.
In the recently published Kimberley Process (KP) for 2015, the annual report on the diamond market, India has been recognized as the world’s largest importer, and Russia the largest diamond exporter. However, the problem is that the majority of Russian gemstones come to India through intermediaries, and not directly.
Representatives of the Indian business community again displayed interest in developing cooperation in this sector during the Innoprom-2016 Forum, held from July 11 to 14 in Yekaterinburg. After the talks concluded, Denis Manturov, Russia’s Minister of Industry and Trade, said “Indian businesses have expressed interest in increasing direct supply of Russian coking and thermal coal, liquefied natural gas, rough diamonds, and mineral fertilizers.”
According to the Kimberley Process (KP) for 2015, India accounted for 37.77% of world imports of rough diamonds, slightly higher than the 37.55% recorded in 2014. Going by the cost of the diamonds, the share of India’s imports increased from 30.40% in 2014 to 31.69% in 2015.
Russia, meanwhile, strengthened its leading position as the world’s largest diamond producer. Diamond mining in Russia rose by 9.4% in 2015, to 41.9 million carats, worth $4.24 billion.
“Russia is the largest exporter of rough diamonds in the world, and India is the largest producer of processed diamond products. So, here we have hidden bright prospects for development of bilateral trade,” said Pundi Srinivasan Raghavan, former Indian Ambassador to Russia from 2012 to 2015. “The problem is that currently more than 80% of the rough diamonds supplied to us from Russia come via third countries. For our part, we are trying to change this situation for the better, and an initiative is now being worked on to simplify our tax rules and customs procedures in the sphere of direct diamond trade. India is very interested in this. The projected income from the expected potential trade could reach about $2 billion a year, and go beyond just the diamond industry and involve the related services sector,” Raghavan said.
Shortening the path to the consumer
The Russian diamond company ALROSA is trying to figure out how to shorten the path that its products travel on their way to Indian consumers. The share of direct deliveries to India, in the total sales of the company, grew from 10% in 2010 to 17% in 2015. However, it is too early to talk about a steady improvement of the situation.
The two governments are also looking for ways to resolve this problem. A special customs zone was created in the Mumbai Diamond Bourse last year, for trade facilitation and development of direct diamond supplies to India. ALROSA, in December 2015, held a trial tender in a duty-free import and export system, and noted the high level of the organized trading. ALROSA today has nine long-term customers in India.
Crisis no hindrance
Despite the general downturn in the global economy, inevitably affecting the diamond industry, it has practically not been touched in India. India’s Gems & Jewellery Export Promotion Council (GJEPC) announced some preliminary data that shows that the volume of exports of processed diamonds from India reached $1.82 billion in March 2016, or 4.34% higher than a year ago.
The Diamond Insight Report 2015, the report on the diamond industry prepared by De Beers, said the retail diamond market in India has been growing steadily in the last 20 years because of economic development and an increase in volumes from a growing customer base.
The Indian government is doing everything possible to support the diamond industry, which brings in large amounts of foreign exchange; from the creation of a special customs zone at the Diamond Exchange, to tax benefits. Most of the diamond cutting and jewellery centres of India are actively developing because of tax and customs benefits, within the framework of the free economic zones that have been set up here.
The Indian government in 2007 abolished all customs duties on the import of rough diamonds into the country, a significant step in the development of the industry as a whole. Indian jewellers also received a gift from the Reserve Bank of India (RBI), which allowed some banks, on certain conditions, to provide unsecured loans for diamond imports for a period not exceeding 180 days from the date of shipment. The banking circular states that the decision was taken after consultations with the Government of India “to mitigate the difficulties faced by importers.”
Where are the diamond mountains going?
The United States has for many years been the largest consumer of diamonds cut and polished in India– more than 26%. The second and third places are occupied by China (13%), and India itself (12%), which surged to third place in 2014 following high rates of GDP growth, leading to higher standards of living and the growing demand for jewellery. India, with a population of over one billion people, has huge domestic potential for development of the jewellery industry.
According to a survey recently conducted by the Diamond Producers Association (DPA), the popular belief that the 21st century generation has no interest in jewellery, preferring to spend money on other luxuries, has been proven false. Buyers in this age group last year acquired twice as much diamond jewellery as gifts, compared with the older age groups.
Indian jewelers are optimistic about the future and hope to meet the projected increased demand with imports of high-quality Russian diamonds.
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