“India’s diamond exports could shrink by a fifth to around $19 billion by the end of fiscal 2021, from $24 billion in fiscal 2019, as the novel coronavirus
(another name for the infection) outbreak amplifies sluggishness in global demand. Much of its impact would be seen in the financial year 2020. While the first half of the financial year 2021 would remain sluggish, there are some hopes for revival in the second half which eventually would keep the full year’s export figure flat,” said Rahul Guha, director at Crisil Ratings.
“We are expecting 15-20 per cent decline in overall gems and jewellery exports this year itself. The Chinese New Year was a complete washout. Export receivables are stuck for over two months. Sooner the recovery will be better for India’s overall gems and jewellery sector including cut and polished diamonds,” said Colin Shah, vice chairman at GJEPC.
India's total diamond exports by value were down by around 18 per cent in the first nine months of this fiscal. About 40 per cent of these exports are to Hong Kong, which has seen dysfunctional local markets
over the past year or so. Moreover, there has been no diamond export to the island since January 15 this year.
“Exports would continue to fall in the closing quarter of this fiscal, which typically accounts for roughly a third of India’s exports to the south-east Asian region. Given extended holidays in the region and shutdown of markets
in the aftermath of the n-CoV outbreak, exports worth over $1 billion may be lost in this quarter alone,” said Subodh Rai, Senior Director, Crisil Ratings.
Coronavirus couldn’t have come at a worse time for an industry buffeted by tepid demand, declining realisations, and anti-China protests in Hong Kong. Even if the disease is contained in the next two months, trade normalcy and demand uptick from Hong Kong is unlikely before the middle of next fiscal. Consequently, exports next fiscal would remain down or be at best flat because any traction in the second half would be offset by the weak first half.
Indian exporters avail of post-shipment credit from banks tantamount to 60-70 per cent of their export receivables. Also, Indian banks typically fund no more than 90 per cent by value of the bills presented under post-shipment credit. That means more than 40 per cent of the cash flows available in the system doesn’t typically have underlying bank liabilities, and can be used by exporters during exigencies.
Also, the other significant export markets
for Indian diamonds include the US, with 35 per cent share, followed by the EU, the Middle East, and Japan along with the rest of South East Asia, with about 10 per cent each.