Kiran Gems, one of the world’s largest diamond manufacturers based in Surat, has made headlines by sending 50,000 workers on temporary leave. This drastic measure is driven by a significant drop in global demand for polished diamonds, intensified by economic and geopolitical factors.
Global Demand Decline
Kiran Gems, with a yearly turnover of Rs 17,000 crore, has witnessed a 15% drop in rough diamond production for Q2 FY24. The firm’s chairman, Vallabhbhai Lakhani, stated that this reduction in demand has led to the unprecedented decision to implement a 10-day vacation from August 17 to 27.
Reasons Behind the Move
Lakhani explained that the global decrease in polished diamond prices has strained the industry. Controlling supply through this temporary shutdown is hoped to help rebalance demand and benefit the sector. Despite the tough decision, all workers will continue to receive their salaries, though some amounts will be withheld.
Economic and Geopolitical Impact
The downturn in the diamond industry is partly due to global economic uncertainty and geopolitical conflicts. The Russia-Ukraine war and the Israel-Palestine conflict have notably affected diamond demand. Russia’s Alrosa, a major supplier of rough diamonds, has been impacted by U.S. sanctions, disrupting the supply chain.
Local Industry Struggles
Surat processes nearly 90% of the world’s diamonds and has faced severe challenges due to these global disruptions. The turnover of the diamond industry has fallen from Rs 2,25,000 crore in 2022 to Rs 1,50,000 crore. The decrease in global demand has forced many local businesses to reduce operations, resulting in job losses.
International Sanctions and Adjustments
The European Union and G7 countries have imposed bans on Russian-origin diamonds, exacerbating the supply issues. External Affairs Minister S. Jaishankar has highlighted ongoing efforts to address these challenges and mitigate the impact on the industry.
Kiran Gems’ decision reflects the broader struggles within the diamond industry, facing a mix of economic hardship and international pressures. As the sector adapts to these challenges, the temporary leave for its workforce underscores the severe impact of current global conditions on local industries.
