The diamond industry in Surat looks set to be hit by 40% in the short run because of the Centre’s recent decision to scrap R500 and R1,000 notes from the market.
The diamond industry in Surat looks set to be hit by 40% in the short run because of the Centre’s recent decision to scrap R500 and R1,000 notes from the market. The sector, which is currently in the midst of its three-week Diwali vacation, is concerned that it may be three months before the industry resumes smooth functioning.
“The daily turnover in the Surat diamond industry is usually R125 crore, we are estimating that business will be affected by almost 40% until the current panic over the demonetisation is over and people have currency again”, said Pravin Nanavati, joint secretary, Gujarat Heera Bourse.
According to Nanavati, there are 4,000 units working within the diamond industry in Surat, of which about 3,000 units are run by small traders and workers involved in the polishing of diamonds imported from some African countries and later exported. “Only 2% of the total production in the industry is for domestic consumption. The gems and jewellery sector is responsible for practically 22% of the R1,85,000-crore exports by India to other countries. Exporters have always paid by cheques or cards, they will not face any trouble making payments. However, at least 1 crore people are indirectly dependent on the diamond industry in Surat, and they will have trouble with procurement of raw materials as well as sales in the near future. Later, the system will settle and this decision by the Centre is unlikely to cause long-term harm to the sector”, Nanavati added.
Jewellers in Ahmedabad are seeing sales drop to less than 25%, despite this being the peak season for people wanting to buy jewellery in the state.
“Since the announcement made about the demonetisation, sales have dropped to less than 25% but people are still making queries, placing orders, etc. People are unclear about the currency right now, which is causing certain confusion, but we expect that to clear up within the next four days itself”, said Manoj Soni of Ahmedabad-based AB Jewels. Several jewellery houses are also giving discounts and jewellery to trusted customers without asking them to make payments right now.
Several jewellers in Gujarat kept stores open till midnight on the night of the demonetisation announcement by Prime Minister Narendra Modi, achieving brisk sales in that four-hour period. Explaining the phenomenon, Soni said, “People thought these R500 and R1,000 notes would stop working and hold no value from the next day, so they rushed to buy jewellery. We are keeping in touch with our customers and explaining that there is no need for panic at all, and we expect the message to spread in two days, which will allow our business to get back on track.”