More than 15,000 people have been laid off in the past few weeks in the labour intensive sector

As the economic slowdown is deepening across sectors, India’s diamond hub in Surat is facing its worst crisis since 2008. The industry has seen more than 15,000 people being laid off in the past few weeks as the labour intensive sector is losing sheen owing to multiple factors, including the escalating trade war between China and the U.S., liquidity crisis at home and issues related to the Goods and Services Tax.

Since December 2018, almost one lakh people, mostly workers working in the sector that includes factories engaged in cutting and polishing rough diamonds, have lost their jobs, making it the worst crisis since the global slowdown in 2008.

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It may be noted that India is the world’s largest cutting and polishing centre of rough diamonds, processing as many as 14 out of every 15 rough diamonds in the world. And more than 95 % of diamonds are cut and polished in several thousands factories in Surat and other towns of Gujarat.

In Surat alone, as many as seven lakh people are employed in more than 3,000 small and medium factories in the south Gujarat city.

On Tuesday, Surat’s leading diamond group, Godhani Gems, laid off 550 workers as slowdown is becoming entrenched, making the business unviable.

“Yes, workers are being laid off due to multiple factors as the economic slowdown has severely hit the business,” said Dinesh Navadia, former chief of Surat Diamond Association and currently chairman of Gems and Jewellery Export Promotion Council (Gujarat region).

“We can’t deny about the lay-off incidents. But we are trying to convince the unit owners to retain their staff and distribute work among them to at least provide some work to everyone. We can’t help if the unit owners fail to strike a balance,” said Babu Gujarati, president of Surat Diamond Association.

Meeting with Nirmala Sitharaman

On Wednesday, Mr. Navadia and other representatives met Union Finance Minister Nirmala Sitharaman to discuss their issues including accumulation of GST, lowering of taxes and lending by banks.

Among the main factors hitting the sector includes unabated price rise in rough diamonds, even as polished diamond prices stopped moving up because of dip in overseas demand affected by escalating trade war between two main markets: China and the U.S.

According to the market insiders, the top five global diamond mining players have been jacking up the prices without responding to the price trend of polished diamonds. On the other side, prices of polished diamonds have dropped 6-10% in the past four months due to weak demand, which is unlikely to see revival in near future.

Mr. Navadia said that U.S.-China trade war, and devaluation of Yuan has further fuelled the crisis in recent weeks. Another prominent factor is the government measure such as hiking the custom duty on gold imports that has proved costly for the industry.

According to the GAJEPC figures, exports of cut-and-polished diamond dropped 18.15% in July and 15.11% for the first four months of fiscal 2020, compared with a year earlier. Overall, gem and jewellery exports fell 6.67% during April-July period.