The world’s diamond polishing capital feels Ukraine war impact

In Surat, a city in western India known as the diamond polishing capital of the world, the ongoing war in Ukraine has had a significant impact on the local diamond industry. One heartbreaking story is that of Nikunj Tank, a diamond polishing worker who tragically took his own life after losing his job. Nikunj had worked for seven years at a diamond polishing unit that recently closed due to financial difficulties. As the sole breadwinner for his family, which included his parents, wife, and daughter, he faced immense pressure after becoming unemployed. His father, Jayanti Tank, shared, 'He couldn’t find a job and unable to bear the loss, he took the extreme step. ' This incident highlights the severe emotional toll that the downturn in the diamond industry is having on workers and their families. The diamond industry in India has been struggling for several years, and the situation has worsened recently. Surat processes an astonishing 90% of the world’s diamonds, employing over 800,000 polishers across more than 5,000 units. However, the industry has faced a significant decline in exports, with the value of cut and polished diamonds dropping from $23 billion in 2022 to $16 billion in 2023, and projections suggest it may fall further to $12 billion in 2024. Analysts attribute this decline to a combination of factors, including reduced demand and an oversupply of polished diamonds, which has led to a price drop of between 5% and 27% in 2023. Mahesh Virani, a representative from Star Gems, explained that many polishing units continued to produce diamonds despite the lack of demand, hoping to keep their operations running, which ultimately increased their financial losses. The Diamond Workers’ Union, which represents polishers in the region, reported that over 30,000 workers have lost their jobs in just the past six months due to the downturn. They also indicated that, according to their data collected from victims’ families, police records, and news reports, 65 workers have died by suicide in the state over the past year and a half as a result of the economic slowdown. While the BBC could not independently verify this figure, it underscores the gravity of the situation. Experts have pointed to several factors contributing to the crisis in India’s diamond industry, including the Covid-19 lockdown, the ongoing wars in Ukraine and Gaza, and a decline in demand from key markets. Vallabh Lakhani, chairman of Kiran Gems, a leading manufacturer, stated, 'The business of polished diamonds has gone down by more than 25-30% due to global recession. ' India imports approximately 30% of its rough diamonds from Russian mines, which are now under Western sanctions due to the war. This has complicated the supply chain for Indian diamond processors. In March, the European Union and G7 countries imposed restrictions on the import of Russian unpolished diamonds, including those processed in India and sold in Western markets. Following the new ban, Indian officials, including External Affairs Minister S Jaishankar, expressed concerns that such measures disproportionately affect workers at the lower end of the supply chain rather than Russia itself, as producers often find alternative routes to sell their diamonds. Traders in Surat echoed this sentiment, with exporter Kirti Shah stating, 'India is at the low end of the value chain of the diamond industry. The country is highly dependent on the global market, both for raw materials as well as for final sales. ' The economic downturn in G7 countries, as well as in the UAE and Belgium—key destinations for Indian diamond exports—has further exacerbated the situation. Additionally, the rise in demand for lab-grown diamonds, which are a more affordable alternative to natural diamonds, has contributed to the decline in the traditional diamond market. The ongoing conflict in Gaza has also affected trade with Israel, which is another important market for Indian diamonds. Kumar Kanani, a lawmaker from the ruling Bharatiya Janata Party (BJP) in Gujarat, acknowledged the challenges facing the diamond sector in Surat, stating, 'The diamond sector in Surat is passing through a bad phase. ' He mentioned that police are investigating the suicide cases linked to job losses, but families of workers who have taken their lives have reported receiving little assistance from the government. Most of the job losses have occurred in small and medium-sized polishing units, which typically hire workers for quality checks and polishing. However, larger companies are also feeling the effects. For instance, Kiran Gems recently asked its 50,000 employees to take a break due to the slowdown. In July, the Diamond Workers' Union launched a helpline that received over 1,600 distress calls from polishers seeking jobs or financial assistance. The situation has been particularly difficult for families like that of Vaishali Patel, who lost her husband Nitin two years ago when the polishing unit he worked for laid off many employees. Brokers and traders in Surat are also struggling, with Dilip Sojitra, one of the 5,000 brokers in the city, stating, 'We have been sitting idle for days. There is hardly any sale or purchase. ' Even lab-grown diamonds, which were once in high demand, have seen their prices plummet from $300 to $78 per carat due to overproduction, further impacting the market. Nandlal Nakrani, president of the Surat Diamond Brokers Association, believes that the situation will improve when the prices of rough diamonds decrease and polished diamond prices rise. Despite the current challenges, some individuals remain hopeful for a recovery in the industry, similar to what occurred after the 2008 Great Recession, which resulted in the closure of numerous polishing units and left thousands unemployed. Mr. Sojitra expressed optimism that the upcoming festival season, including Diwali, Christmas, and New Year, will help boost business. 'This too shall pass,' he remarked, reflecting a sense of resilience in the face of adversity.