Surat’s Diamond Industry Faces Crisis: Layoffs and Closures Mount

Surat's diamond industry is confronting an unparalleled crisis, driven by geopolitical tensions and market shifts. The G7's ban on Russian diamonds and the rise of lab-grown alternatives have caused supplies to dwindle and demand patterns to shift. Nearly 200 diamond factories have shut down temporarily, leading to massive layoffs exceeding 50,000 workers. This downturn has spurred severe economic consequences, with exports plummeting nearly 28% in 2023-24. Compounding these challenges are the devastating mental health impacts and inadequate government responses, making recovery efforts imperative. For those seeking nuanced insights into this complex situation, numerous factors are interplaying in this crisis.

Main Highlights

• Over 50,000 workers have been laid off in Surat's diamond industry since early 2023.
• Nearly 200 diamond cutting and polishing factories in Surat have temporarily shut down.
• The Gujarat diamond industry is experiencing its worst recession in 50 years.
• A significant decline in India's diamond exports highlights the industry's current struggles.
• Rising mental health issues among workers due to economic pressures have been reported.

Root Causes of the Crisis

The root causes of the crisis in Surat's diamond industry are multifaceted, primarily stemming from supply chain disruptions, declining demand, and geopolitical tensions. A significant factor is the ban on Russian diamonds by G7 countries, which has severely restricted the supply chain. Russia, being a major source of rough diamonds, is essential to India's cutting and polishing sectors. The sanctions against Russian diamonds have not only disrupted availability but also affected exports to key global markets, such as the US, China, UAE, and Hong Kong. Additionally, geopolitical tensions, particularly the ongoing Russia-Ukraine conflict, have exacerbated these issues. The European Union and the G7's ban on Russian diamond imports, even via third countries, has cut off nearly a third of India's diamond revenue. This vulnerability to international tensions highlights the deep-seated challenges faced by Surat's diamond industry. Furthermore, the joblessness among diamond workers has reached unprecedented levels, contributing to the economic hardship faced by many families. Moreover, the lack of government intervention from both the Centre and state to assist workers during this crisis has intensified the economic hardship faced by many families depending on the diamond sector. Compounding these issues is the declining global demand for natural diamonds. The rise of lab-grown diamonds is reshaping market dynamics, further complicating the landscape for natural diamond businesses. With the festive season approaching, there is hope for a demand resurgence, but the industry's structural vulnerabilities remain significant hurdles.

Economic Consequences

Economic turmoil has gripped Surat's diamond industry, manifesting in widespread employment disruptions and financial strains. The sector, once a lighthouse of economic vigor, now finds itself beleaguered by adverse market trends and dwindling global demand. A staggering 45,000 workers have faced layoffs since early 2023, with a significant portion of diamond industry units remaining shuttered post-Diwali. The impact of fresh sanctions on Russian-origin diamonds, regardless of processing location, has further compounded the challenges faced by the industry. The struggles of the industry over the past 2.5 years have been characterized by a significant drop in diamond prices and extended closures of units, highlighting a sustained downturn.

This contraction has halved the workforce, leaving many grappling with diminished incomes and uncertain futures.

• Export Decline: India's diamond exports fell by nearly 28% in 2023-24, reflecting the global market downturn.
• Price Drops: Diamond prices have plummeted by 35-40% over the past two and a half years.
• Alternative Employment: Economic hardships have nudged workers towards street vending and content creation.
• Suicides and Financial Strain: Over 45 worker suicides highlight the severe human toll of the crisis.

The financial challenges extend beyond the labor force. Imports of rough diamonds dipped by 7.55%, further straining the supply chain.

Requests for government intervention underscore a critical need for adaptive strategies. As stakeholders seek relief, the industry's revival hinges on aligning with evolving market demands and fostering resilience in the face of global economic shifts.

Impact on the Industry

Surat's diamond industry is grappling with a profound crisis, underscored by extensive job losses and the closure of numerous polishing units. Over 50,000 workers have lost their jobs in recent months, with the ripple effects felt by nearly 800,000 individuals employed in the sector.

This crisis has spotlighted the importance of worker solidarity and industry resilience, as small to medium-sized polishing units face significant financial strain. Larger companies, such as Kiran Gems, are also taking drastic measures, including enforced vacations due to the downturn.

Geopolitical tensions, particularly the Russia-Ukraine war and the Israel-Gaza conflict, have disrupted the supply chain, while Western sanctions on Russian diamonds have further restricted supply. De Beers reported a 15% reduction in rough diamond production in Q2 2023, exacerbating the challenges for the industry. The rise of lab-grown diamonds has also contributed to the challenges faced by the industry, as they offer a more affordable alternative to natural diamonds, further impacting demand.

These factors, coupled with declining global demand, have led to a sharp decrease in India's diamond exports, with polished diamond prices falling by 5-27%. The livelihood of over 10 lakh people directly depends on this industry, emphasizing the urgent need for resilience and adaptation.

Amid these challenges, the industry must harness worker solidarity to navigate this tumultuous period, fostering collaboration and innovation to emerge stronger from the crisis.

The path forward requires collective effort and strategic planning.

Government Response

Amid the mounting crisis in Surat's diamond industry, government responses have been met with mixed reviews, highlighting both awareness and inadequacy.

The Gujarat Congress has urged the Central government to engage in diplomatic negotiations concerning G7 sanctions, yet concrete actions remain elusive. While India's Minister of External Affairs, S Jaishankar, expressed concern over the G7's ban on Russian diamonds, the absence of decisive government intervention has drawn criticism, particularly from Gujarat Congress president Shaktisinh Gohil. The financial crisis triggered by the war has resulted in a significant loss of diamond revenue for India, with approximately 33% of revenue lost due to the sanctions, exacerbating the industry's challenges. The increasing presence of lab-grown diamonds also poses a significant challenge to the traditional diamond market, further complicating the recovery efforts for Surat's industry.

Efforts to address economic hardships faced by diamond workers also appear insufficient:

• Proposals for economic relief packages for displaced workers linger without implementation.
• Calls for the revival of the "Ratandeep Yojana" to improve skills remain unaddressed.
• The Gujarat Diamond Workers' Union's demand for waiving professional tax has yet to be met.
• A proposed special board to address industry challenges lacks government support.

Internationally, sanctions enforced since March 2022 have greatly impacted India's diamond trade, necessitating diplomatic negotiations to diversify raw material dependence.

Despite these challenges, calls for government intervention persist, emphasizing the need for strategic action to prevent further deterioration of the industry amidst increasing layoffs and closures.

Social Challenges

The social fabric of Surat's community is facing substantial challenges due to the diamond industry's downturn, with rising unemployment being a prominent concern as over 20,000 workers find themselves jobless. This economic hardship has precipitated severe mental health struggles, as evidenced by the tragic increase in suicide rates among affected workers, highlighting the urgent need for mental health support and intervention. Furthermore, the financial distress experienced by these workers extends beyond individual struggles, impacting families who are now grappling with the inability to afford basic necessities and education, underscoring the broader societal ramifications of the industry's decline. The advent of lab-grown diamonds, which offer a 15-20% price advantage, has also contributed to the industry's struggles, affecting traditional diamond markets and further exacerbating the crisis. The surge in suicides among diamond workers, with at least 65 cases reported in 16 months, underscores the dire mental health crisis faced by the community.

Rising Unemployment Concerns

While Surat's diamond industry has long been a cornerstone of employment in Gujarat, the sector is currently grappling with a severe unemployment crisis. Over 50,000 diamond workers have lost their jobs in the past eight to nine months, deeply unsettling the job market. This crisis has not only affected those directly employed but has reverberated through the livelihoods of over 10 lakh people who depend on this industry.

As global demand for polished diamonds wanes, the workforce faces the pressing need for adaptation in a rapidly shifting economic landscape. Additionally, the rise of lab-grown diamonds has significantly contributed to this downturn, with demand for natural diamonds decreasing by 40-50%, leading to further layoffs. The Surat diamond industry, which processes a significant portion of the world's rough diamonds, has been severely impacted by these changes.

The challenges are exacerbated by several factors:

• Supply chain disruptions: The Russia-Ukraine war has disrupted raw diamond supplies.
• Sanctions: G7 sanctions on Russian diamonds have hindered import and export activities.
• Demand decline: Global markets show decreased interest in polished diamonds.
• Price fluctuations: A significant drop in polished diamond prices, ranging from 5-27%.

As factory closures and layoffs continue, the diamond industry, traditionally a key employment provider, is now a source of social strain.

The need for strategic workforce adaptation and policy intervention is more critical than ever, as the region seeks to stabilize its economic foundation amidst these challenges.

Mental Health Struggles

Surat's diamond industry is not only grappling with economic challenges but is also witnessing a profound impact on the mental health of its workforce. The crisis has manifested in alarming statistics: 71 diamond workers have tragically died by suicide in the past 18 months, exacerbating the urgent need for worker support.

Over 2,500 distress calls have been made to the DWUG helpline since July, averaging more than 50 calls per day, highlighting the widespread mental health struggles among those affected by job losses and salary cuts. The industry also faces the added burden of the US sanctions on Russian diamonds, which have further strained the market conditions. The Congress party has issued an urgent call for government intervention to address the dire situation and provide necessary support to the distressed workers.

The primary causes of distress are rooted in severe economic pressures, largely due to the disrupted supply chain from geopolitical tensions, including the Russia-Ukraine war. These challenges have considerably impacted diamond exports, leaving workers in financial turmoil.

The DWUG helpline has become a critical lifeline, addressing both financial and psychological distress through counseling and financial aid, including aiding parents with school fees.

Building mental resilience is key, and the helpline's efforts in reinstating workers and providing support reflect a pivotal step towards recovery.

Yet, the need for thorough government intervention remains pressing to guarantee sustainable support for the affected workforce.

Financial Distress Impacts

Amid the unfolding crisis, financial distress has emerged as a significant social challenge for Surat's diamond industry, catalyzed by a precipitous decline in exports.

With India's diamond exports plummeting from $23 billion in 2022 to a projected $12 billion by 2024, the ramifications are profound. This decline, driven by global supply chain disruptions and market fluctuations, has exacerbated issues of job security and wage disparities among workers. The Gujarat diamond industry is facing its worst recession in 50 years, with over 50% of factories having shut down post-Diwali vacation.

Economic resilience is tested as the industry grapples with production challenges and shifting consumer demand.

The social challenges are underscored by:

• Job security concerns: Over 50,000 workers have faced layoffs, with 2000 factories ceasing operations.
• Wage disparities: Workers' wages have sharply decreased, affecting their economic stability.
• Labor rights issues: Extended work breaks and reduced employment opportunities highlight vulnerabilities.
• Supply chain disruptions: Sanctions and global tensions have hindered export trends, impacting the industry's outreach.

While industry innovations such as lab-grown diamonds may offer future solutions, immediate relief requires concerted efforts from both state and central governments.

The call for educational and healthcare support for workers underscores the urgent need for thorough intervention to navigate the ongoing crisis.

Path to Recovery

As Surat's diamond industry navigates its path to recovery, the upcoming festive season presents an essential opportunity to bolster sales and rejuvenate market confidence. Simultaneously, industry leaders are prioritizing diversification and investing in training initiatives to equip workers with new skills, thereby enhancing the sector's adaptability and resilience. Despite the challenges, the industry is hopeful that the reduced activity in major markets like the US and China will eventually stabilize, allowing for a more balanced supply and demand dynamic. The temporary shutdown of nearly 200 diamond cutting and polishing factories in Surat highlights the urgent need for strategic planning to address the ongoing market challenges. These efforts aim not only to mitigate the immediate impacts of the crisis but also to lay a foundation for long-term growth and sustainability in a rapidly evolving global market.

Festive Season Opportunities

For many, the festive season brings a glimmer of hope for Surat's beleaguered diamond industry, which is grappling with a prolonged downturn. Amidst challenging market conditions, there is optimism that festive marketing and shifting consumer sentiments could ignite a modest recovery.

With international demand from the US and China showing potential, the industry looks to capitalize on this period to offset losses exacerbated by geopolitical tensions and sanctions.

Key factors influencing this seasonal opportunity include:

• Global Supply Chain Significance: Surat processes nearly 90% of the world's diamonds, underscoring its crucial role in meeting worldwide demand.
• Merchandise Export Contribution: The gems and jewelry sector notably impacts India's exports, contributing 10-12%.
• Market Demand: Recovery efforts hinge on the buying power of key markets like the US and China, whose demand is essential.
• Festive Marketing Strategies: Leveraging consumer sentiments during the festive season could drive sales, offering a temporary respite.

Despite the current challenges, including extended factory closures and reduced demand for rough diamonds, the industry remains hopeful.

Diversification and Training Initiatives

Diversification and training initiatives are crucial to Surat's diamond industry as it navigates a path to recovery. The emergence of lab-grown innovation is a cornerstone of this transformation, with the Gujarat government's allocation of Rs 7 crore to establish a Centre for Excellence (CFE) in Surat. This strategic move not only underscores the potential of lab-grown diamonds as a sustainable and ethical alternative but also provides a price advantage of 15-20% over natural diamonds. As Surat stands as India's largest producer of these gems, the diversification into lab-grown diamonds has become fundamental, offering new avenues for growth and stability during these challenging times.

In addition to diversification, educational advancements are significant. The Indian Diamond Institute and Arihannt Diamond Institute in Surat offer extensive courses designed to equip students with professional technical knowledge and the latest technological updates. These programs prepare individuals for employment or entrepreneurship in the gem and jewelry sector. The CFE is set to further elevate these efforts by offering research and development facilities, fostering industry collaborations, and creating job opportunities. With the global diamond market valued at approximately $87 billion in 2020, such initiatives are crucial for positioning Surat's industry competitively on the world stage. The summit served as a platform for discussing sustainable growth for small businesses, highlighting the importance of such initiatives for empowering the industry, enabling it to capture emerging opportunities and improve competitiveness.

Frequently Asked Questions

How Can Affected Workers Seek Immediate Financial Assistance?

Affected workers can seek immediate financial aid by registering with the Gujarat Diamond Workers Association and the proposed Ratnakalakar Kalyan Board. Simultaneously, they should pursue worker retraining programs to investigate alternative employment opportunities and achieve greater economic freedom.

What Are the Long-Term Effects on Surat's Local Economy?

The long-term effects on Surat's local economy include diminished local business activities, necessitating robust economic recovery strategies. Diversification and skill development are crucial to foster resilience and provide opportunities, promoting freedom from dependency on the diamond industry.

How Does the Crisis Affect Diamond Supply Chains Globally?

The crisis has released unprecedented supply chain disruptions, sending shockwaves through global diamond prices. As markets yearn for stability, the reverberations challenge traditional trade dynamics, offering an opportunity for creative solutions to reshape the diamond industry.

What Role Do International Organizations Play in Addressing This Crisis?

International organizations facilitate industry collaboration and provide international aid to stabilize global diamond markets. By fostering dialogue, they help navigate sanctions, ensuring supply chain resilience and supporting affected communities, advocating for fair trade practices and sustainable economic freedom.

How Can Consumers Support the Diamond Industry During This Crisis?

Consumers can support the diamond industry by choosing ethically sourced gems and promoting consumer awareness. Embracing lab-grown alternatives and demanding transparency in the supply chain empowers freedom of choice, aligning luxury with sustainability and ethical responsibility.

Conclusion

The crisis in Surat's diamond industry, driven by complex economic and social factors, has led to a cascade of layoffs and closures, threatening the very heart of this glittering empire. Economic repercussions are profound, affecting local and global markets, while the government's response remains a vital determinant for recovery. Addressing the intricate social challenges will require multifaceted strategies. A glimmer of hope lies in innovation and adaptation, which may pave the way for the industry's renaissance.

Andrew Wilson

Andrew Wilson is a seasoned writer specializing in the jewellery industry and news. His career began in the newspaper industry, where he honed his reporting skills and developed a keen eye for detail, laying the foundation for his meticulous research in later writing endeavors. Transitioning into marketing, Wilson gained valuable insights into consumer behavior and market trends, enriching his understanding of the jewellery industry when he embraced full-time writing about 15 years ago. In 2019, he discovered a passion for jewellery writing, focusing on market trends and innovative designs. A member of the International Gem Society, Andrew's work is characterized by thorough research and accuracy, offering comprehensive insights into the jewellery world. He occasionally adopts pseudonyms to cater to different audiences and business needs, serving a diverse clientele, including numerous jewellery businesses. Recognized for his unique blend of industry knowledge, research prowess, and engaging writing style, Wilson is dedicated to demystifying the jewellery industry, making it more accessible and understandable to both enthusiasts and professionals.