Mining as well as stores closed, expos cancelled and transportation stopped. The gems and jewellery sector in India is facing a bleak future. "We lost 50 per cent of our business even before the full lockdown was announced," says Colin Shah, Vice Chairman, Gems and Jewellery Export Promotion Council (GJEPC).
A lot will depend of what the global behemoth - Diamond Producers Association - does. It is an alliance of the seven largest diamond companies, which control over 75 per cent of the world's diamond production, and prices.
India accounts for only 7 per cent of global diamond consumption, so its influence is minimal. Indian businesses are, however, looking at the option of competing with value-added products like coloured gemstones, which have better margins.
Getting more aggressive in the domestic market is another avenue that companies are looking at. This may also help reduce their dependence on a few geographies. At present, India's two main export destinations are the US (26 per cent; worth $9.54 billion) and Hong Kong (29 per cent; $10.35 billion). Pankaj Khanna, MD, Khanna Gems, notes that gems or jewellery is a luxury item and revival can happen only after life returns to normal. "That will take time. And now people are keeping cash to meet the crisis," he says.
Normally, gems and jewellery exporters keep an inventory of finished products for about 30-45 days. Even if the coronavirus scare recedes in three weeks and production restarts at Surat and other centres like Bhavnagar, the production cycle revival will depend on when the major markets return to normalcy. "If there is no demand, what is the point in producing? Globally, prices had fallen 12 per cent, and my estimate is that it could fall further by 25 per cent. It will take three to six months for the cycle to get back on track, depending on how fast countries return to normal," says Saurabh Khandelwal, owner of Delhi-based Dhanvi Diamonds.
The diamond cutting and polishing industry, based mainly in Surat, employs more than five million people. "GJEPC, from our own reserves, has decided to contribute Rs 50 crore towards several welfare initiatives for daily wage workers, and has appointed a task force to decide on modalities of utilisation," says Pramod Agrawal, Chairman, GJEPC. Shah adds that exporters have also asked the government to include the sector in the list of work covered under MNREGA so that workers are able to sustain during this difficult period.
Gold is in a similar situation. Though prices have fallen globally for asset classes, gold - normally considered a safe haven - has no takers during this global crisis. The World Gold Council reasons massive liquidation in all asset classes as the reason for fall in gold prices, though it has historically given over 9 per cent returns in the past 10 years in India.