It seems demonetisation is not the diamond industry’s best friend. Diamond sales have been hit the hardest in the jewellery sector by the government’s move to make R500 and R1,000 notes invalid as legal tender, according to jewellers and industry executives.
The half a dozen jewellers that FE spoke to said while their diamond sales have crashed by up to 50% this week, compared with a week before monetisation, the silver and gold segments saw a fall of up to 40% and 30%, respectively. Gold seems to have capitalised on its status as a safe-haven asset and an alternative to the banknote, apart from its traditional appeal as an indispensable item in most marriages, they added.
A trader from Surat, the country’s diamond hub with an annual turnover of around R1 lakh crore, said many workers are unlikely to get wages until the cash crunch eases. Also, the angadias who deliver diamonds and cash to their parties would find it hard to stay in the business. “The demonetisation step has not affected the diamond prices, but there are no sales happening in diamonds, post the move. It will take at least 3-4 months for things to come back to normalcy,” Ishu Datwani, founder, Anmol Jewellers.
Samir Sagar, director at Manubhai Jewellers, said: “The movement in terms of footfall itself is slow overall across segments. Gold sales have dropped down by 25-30%. With diamonds, we have observed a 45-50% drop in sales. Currently, we are just waiting and watching on how things progress. New orders too are slow at the moment.”
In the gold segment, where a company outsources jewellery making to artisans, it usually makes payment to a main karigar in cheque, based on the work done. The main karigar at these workshops has to pay to the karigars working under him, which is either a fixed amount or on per piece basis. The cash crunch had impacted these smaller karigars who usually get their payment in cash from the main karigar, said Datwani.