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India's diamond industry faces hard times
November 12, 2015, 3:36 pm
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Nine- tenths of the world’s natural diamonds pass through the Indian state of Gujarat, where they are cut and polished before being sold on through the trading houses of Antwerp and Dubai. Diwali, the Hindu holiday most characterised by gift-giving, fell on 11 November this year. It kicks off a season of coolish weather, auspicious weddings and hot retail activity.

Global demand for diamonds hits its annual peak just before the festival. Then, with shops around the world stuffed with the gems to last through till Christmas, the workshops of Surat, on the Arabian Sea, shut down for an annual unpaid, month-long break for their workers. Perhaps half a million Indians head home for the holidays, while shop managers settle their accounts in homemade chopri, or bank books.

A port once notorious for an outbreak of bubonic plague in 1994, Surat is home to what must be the world’s biggest cottage industry. Perhaps 2,000 of the 5,000-odd operations that buy diamonds for polishing are reasonably large operations, employing 300-500 grinders, most of them migrant workers. The rest are small-scale, family-owned affairs with maybe a couple of grindstones. Many struggle to afford the rough diamonds in the first place.

The sidestreets of Varachha bazaar, thick with scooters, give a clue to how the small-scale businesses operate. Peer through the ground-floor windows and you see fluorescent lights illuminating the bright white stones being worked by hand. The overwhelming majority of families here are “Kathis” from the Patidar caste, migrants from Gujarat’s Kathiawar peninsula. Most families came from its dry, overworked tracts as dispossessed farmers in the 1960s. Other Suratis esteem them grudgingly for their devotion to clan, to long hours and to mawa, the harsh tobacco they chew to stay sharp behind the cutting wheel.

Last year the bigger polishing outfits were able to distribute eye-watering bonuses to lure their (migrant) workers back. This year some are flirting with bankruptcy. A worldwide glut of polished diamonds and falling prices have hit the Surat business hard. The polishers buy on credit, so even when demand is low they must sell, however sharp the loss. Exports in September were down by 28 percent year-on-year, driven partly by slowing Chinese demand for luxury goods.

At sunset in Varachha, men lounge on pillion seats and handcarts, passing around open packets of diamonds worth several years’ salary. The level of trust embodied in this form of community is astounding—and essential to their trade. The newcomers are mainly from Bihar, where semi-skilled work and half-decent wages are hard to find. One Bihari expects 20,000 of his countrymen to leave Surat permanently during the current slump.

Damji Mavani of the Surat Diamond Association, whose family came from the Kathiawar in 1964, expects Varachha as a whole to survive. Kathi clansmen will lend to clansmen, with every Kathi in these warrens watching out for everyone else. But the bigger houses, with access to bank credit, will fare better. Mr. Mavani reckons the very nature of the cottage industry for diamonds is changing, and that consolidation looms.

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