MSME Dominated Diamond Polishing Industry Revenue May Drop 30-35% in 2023-24: CRISIL

New Delhi, Oct 19 (KNN) India's diamond polishing industry is expected to witness a revenue drop by 30-35 per cent to USD 14-15 billion in current fiscal year on poor demand from the US, EU and China, rating agency CRISIL said on Wednesday.

India exports 75 per cent of its polished diamonds to US, China and EU.

Rahul Guha, Director, CRISIL Ratings said, "Israel imports USD 1.25 billion worth of polished diamonds annually from India. With the country now declaring a war on the Palestinian militant group Hamas, this number could be at risk.”

“There is some increase in demand in the second half of every fiscal from festivities such as Thanksgiving, Christmas and the Chinese New Year, but this is unlikely to provide a significant offset this time,” he said.

Guha added that the Indian diamond industry is likely to shrink by over a third on an annualised basis this fiscal.

According to CRISIL, with the inventory of higher-cost polished diamonds piling up to over four months of sales, profitability of polishers will be chiselled 50-100 basis points amid lower retail prices.

The silver lining is that a shrinking business translates to reduced debt, which will offset the pressure on credit risk profiles of diamond polishers, it said.

CRISIL further said that the demand for polished diamonds started weakening since last fiscal amid slowing economic activity leading to a volumetric drop of 25 per cent. But worries about supply of rough diamonds following western sanctions on Russian mining major Alrosa supported prices. Polished diamond price on an average was up nearly 10 per cent last fiscal on-year, it added.

This helped arrest the decline in India's polished diamonds exports to USD 22 billion last fiscal from USD 24.2 billion in fiscal 2022. The report added that in 2023-24, not only has demand fallen further in major markets, but also there has been no disruption in the supply of roughs. Consequently, prices of roughs have corrected, leading to polished diamonds getting cheaper by 10-15 per cent. 

(KNN Bureau)