'Diamond industry expected to cap loss of revenue at 20%; to clock $15 bn in FY21'

Mumbai: Recovery in key export markets and pent-up demand are likely to arrest the decline in revenue of the country's diamond industry to 20 per cent at $15 billion, according to a report.

Crisil Ratings in the report said that when the COVID-19 pandemic took hold, the industry was expected to see a third of its revenue shaved off this fiscal. "However, this could now get arrested at around 20 per cent."

The recent upsurge in spending on diamonds, riding on a combination of pent-up demand and recovery in retail offtake in key markets such as the US and China, is expected to help India's diamond industry contain its decline and close this fiscal with a revenue of over $15 billion, Crisil Ratings said in the report.

Sluggish demand and extended lockdowns globally saw exports plunge to $5.5 billion in the first half, almost half of the previous year's business, it said. However, exports in the third quarter ended December 2020 rose to an estimated monthly average of $1.6 billion, setting the industry up for a tryst with the $15-billion-mark for the full year, it added.

"Trends in recent months have been encouraging. Retail sales in the US and China have grown by about 3-5 per cent, which would provide the industry sustained momentum over the medium term," Crisil Ratings Chief Ratings Officer Subodh Rai said.

He added that while there are new lockdowns in some parts of the EU, the launch of COVID-19 vaccines across the globe is expected to mitigate a massive disruption.

The report said that at the start of the financial year, the industry was grappling with significant build-up of inventory, comprising both rough and polished diamonds, over the previous seven months.

While prices of rough diamond had remained firm, weak demand meant the prices of polished diamonds were falling, thus setting the industry up for significant inventory losses, it stated. Amid the weak demand scenario, however, the miners reduced the prices of rough diamond by almost 10 per cent around the end of the second quarter, it added. With demand also on the rise gradually, the prices of polished diamonds increased by almost 2 per cent in Q3.