Tuesday, 11 August 2020

The Billion Dollar Business of Diamond

Updated: October 23, 2015 7:45 am

Indian gems and jewellery industry is country’s second highest foreign exchange earner after textiles. Today, it contributes about one fifth of the country’s exports. The gems and jewellery industry in India is structured. The total export by this segment in the year 13-14 is approximately US $ 34, 746 million. Which is about 16 per cent of India’s total exports of US $ 35 billion. The industry has been growing at 15-17 per cent annually since last few years.

The Gems and Jewellery industry in India is structured as diamonds, jewellery and precious/semi precious stones. These segments are further divided into sub segments. However, diamonds dominate the total Gems and jewellery exports and contribute US $5.5 billion which means about 81 per cent of the total exports by the industry.Over four decades ago, the Indian gem and jewellery industry was small and concentrated on processing. Last 3-4 decades it registered a phenomenal growth. However, India’s position is now threatened by the entry of Asian countries like China, Sri Lanka, and Thailand, which have targeted small diamond (below one carat) market -India’s stronghold. Last four years’ figures show that the growth rate has now reduced. The Indian industry had been unable to adapt to changing global conditions resulting in accumulation of stocks. Multi-channel purchasing system needs to be accepted. International market conditions are also affecting and important markets like Japan, Singapore and gulf countries have shown sluggish demand. Overall exports of gold jewellery suffered mainly because of interrupted supply of precious metal.

Gems and jewellery industry in India is labour intensive and employs over 1 million. People, which indicates its massive socio-economic impact on Indian sub-continent. The industry is mainly fostered in Gujarat, Maharashtra, Uttar Pradesh, Rajasthan, Tamil Nadu, West Bengal and Kerala. Diamond cutting and polishing began in India in a small way in the 1960s in Surat, when some entrepreneurs belonging to the Patel community started importing rough diamonds and exporting polished diamonds. The industry expanded gradually until the 1980s, when it began to grow rapidly. Proximity to Mumbai for importing raw diamonds and for exporting finished products, combined with the enterprise of Patels from Saurashtra and Jains from North Gujarat, resulted in the rapid growth of this industry. With the introduction of the economic reforms in 1991, the industry expanded further, taking advantage of the new environment.

There’s high amount of innovation in more or less all areas so far as this industry is concerned. The entrepreneurs independently or collectively have contributed in most of the above areas during different phases and of different degrees of contributions. The key innovativeness is summarised here. The diamond industry has developed unique aspect in developing D/D product mix, i.e. dynamic/ diverse product-mix. The Gujarat diamond processing industry is the world’s largest centre for cut and polished diamonds and hence has to cater to virtually the whole world. Jewellery is fashion driven and hence very dynamic in terms of customer tastes and preferences time-wise as well as place-wise. Diamonds are demanded in variety of assortment in various parts of the world. Industry innovated in the product mix keeping it dynamic and diverse by non-standardizing the processing of diamonds, mastering the craft and maintains large raw material inventories. Around the world, 8 out of 10 diamonds on the market were cut and polished in Surat. This industry earns India about 10 billion USD in annual exports. A legacy of old Dutch trade links, it began after a Surti entrepreneur returned from East Africa bringing diamond cutters. The rough diamonds themselves, however, come to Surat as rough crystals ripped out mainly from deep under the earth of South Africa and other regions of the continent, and go from here as smooth gems to Antwerp, Belgium where the international diamond trade is run mainly by Hasidic Jews and Jains from Palanpur in North Gujarat.

31-10-2015

There are innovation in product by improvements in its cut, carat, colour and clarity. Through unmatchable skills in cutting & polishing, there have been variety of new cuts the Indian industry has been able to produce. US market has great demand for fancy cut diamonds processed in India. The popular cuts are: Marquise, Pear shape, Heart shape, step cut, baguettes, tapers, etc.

31-10-2015

Israel may use fully automatic diamond bruiting machine, computerised cantering machine or girdle faceting machine or other innovative automatic machinery, India which uses non-perfect diamonds like polycrystalline, maces, distorted crystals, ‘near gems’ or ‘near industrials’, processing is not easily amenable to automation and has developed machinery to suit these applications as also to take advantage of cheap skilled labour. Indian entrepreneurs have, to their credit, indigenously developed laser kerbing and sewing machines.

Indian diamond industry has identified a niche and has decided to stick to it. The niche of small diamonds (below one carat), Belgium and Israel process bigger diamonds. Also, the industry has not lost focus from overseas export market.

The domestic market is just US $ 120 million compared to US $5000 million export market.

The entrepreneurs in this industry have maintained organic growth model and most of the units are low key with skilled workers directly working under the entrepreneurs. The units have 2 to 50 mills each equipped with 4-5 skilled labours. On an average about 30 craftsmen work in a unit.

The entrepreneurs have unique way of employee recruitment, development way. The skills are passed on from generation to generation and identification of roughs, cutting; polishing and even marketing skills are inherited by people from their senior family members. Education is not emphasised, but learning by experience is what practiced.

Marketing of diamonds by cottage scale units world over is something, which is very surprising. The most crucial model of marketing, which is working for this industry, is networking. Maintaining contacts, keeping relationships with family members and friends abroad does the trick. As the whole industry is clustered around one or few locations, networking works beautifully.

31-10-2015

The Industry organisation is quite unique. Thousands of small units work in harmony. As 95 per cent of the units are clustered around Mumbai and Surat, they are more complimentary than competitive. The industry with such values as borrowing is sin, low start-up capital requirement, and few easy, organized financing options have made it follow unique model of self-financing. Most of the units have started with entrepreneurs’ own money and have grown organically.

Gujarat, better known as entrepreneurial hub of India has enterprise as base of Innovation. The Enterprising behaviour in Gujarat is largely attributed to typical culture of the state.

In the study conducted, Heuristics of the entrepreneurs of Gujarat especially in Industrial cluster of Surat (South Gujarat) Diamond processing Industry were identified as above and can be grouped to arrive at certain entrepreneurial orientations of Gujarati entrepreneur.

Key entrepreneurial orientations observed are as explained below with the influence of internal stimuli viz. beliefs, values, attitudes, learning (Psychological make-up) and external stimuli mainly environmental factors.

Many heuristics, as many as ten, can be taken under this composite factor. Innovations in Gujarat are largely evolving around self-employment and entrepreneurship. Gujarati innovator prefers intrinsically viable projects to externally supported ones. It is noted that the risk reduction strategy focuses on testing the outcomes in advance, and taking calculated risks. In matters of external support and assistance, the Gujarati entrepreneur takes care to develop his strengths first i.e. he seeks assistance only for a unit which intrinsically viable and self supporting. Thus one of the fundamental orientations resulting in unique entrepreneurial behaviour seems to be orientation for intrinsically satisfying activities.

31-10-2015

The Gujarat model of innovation emphasis organic growth. About 7 of the identified heuristics can be grouped to arrive at this orientation. It is hardly found in the particular cluster, the mergers or takeovers of units. This is largely due to culture clashes envisaged by the entrepreneurs. Values such as family orientation and community orientations result in this sort of orientation. The unit holders in Gujarat that are studied here want to keep a tight family control over their business. Environmental stimuli such as childhood family environment, easy availability of resources and negative stimulus such as lack of government support coupled with strong values of family and community orientations lead to this sort of orientation. The industry innovation such as harmonious coexistence can be a result of such orientation. Heuristics pertaining to competition are grouped to arrive at this particular orientation.

Diamond processing is a very traditional and one of the oldest industries in India. Entrepreneurs have tested feasibility of new ideas before investing into them through their informal networks. This strategy to reduce their risks seems to have worked well. It was observed that many decisions in the enterprise are based on ones own experience and poor formal education of the entrepreneurs support that. It was observed further that since childhood their family members who are in this particular business train them and skills are passed on from generation to generation. Unfortunately not many heuristics were identified in the cases studied.

By Sanjay K Bissoyi

Leave a Reply

Your email address will not be published. Required fields are marked *

Archives

Categories