Declining demand and price hike to dampen revenue of India's diamond industry by 15-20%: CRISIL

New Delhi, July 26 (KNN) In the current financial year the revenue of India’s diamond industry is likely to fall by 15-20 per cent as compared to the previous fiscal, as per a report.

The lowering of demand and rise in prices of rough cuts or roughs across the globe will impact the industry, said CRISIL on Monday

The rating agency has identified several other reasons which will collectively hit the demand for diamonds in FY23.

The surge in Covid-19 cases in China is noted as one of the major demand dampeners as they are one of the largest consumers of Indian polished diamonds.

Additionally inflation and optional spending on travel and hospitality will lower the demand for the precious stone.

The travel sector is witnessing an uptick with more and more countries lifting Covid-induced restrictions and this will subsequently dampen demand growth in the US and Europe in the near term, CRISIL noted.

Commenting on the developments, Subodh Rai, Chief Ratings Officer, CRISIL Ratings said, “While volatility in rough diamond prices is typically passed on to the polished diamond prices — albeit with a lag due to the long operating cycle in the trade —tepid demand has kept polished prices from fully catching up with rough prices this time around.”

This could squeeze the operating profitability of Indian diamond polishers by 75-100 basis points to 4-4.25 per cent this fiscal. Accordingly, interest coverage may weaken marginally, he added.

The sanctions imposed by the USA on Russian diamond mining company Alrosa following the former’s invasion of Ukraine in February have slashed supplies of rough diamonds by almost 30 per cent, CRISIL further added.

Alrosa, is the largest diamond producer in the world and the supply constraint will continue amid sanctions on Russia.  (KNN Bureau)