India May Be on Verge of Surrendering Its 'manufacturing Leadership' to China

India’s Rs. 80,000 crore diamond industry has been facing a new threat from China as a result of China’s ‘Africa Investment’ policy. China is said to have made huge investments in some diamond companies of Israel and Belgium and around Shanghai and the provinces of Guangdong and Shandong which according to India’s diamond leaders has posed a new challenge to India’s undisputed leadership in field of manufacturing.

 

Rough diamonds trades declined in India

 

India has seen a reduction in both the import and subsequent export of diamonds. Official figures provided by the Gem & Jewellery Export Promotional Council (GJEPC) indicate that rough diamond imports have slipped from 154.20 million carats in 2010-11 to 131.40 million carats in 2011-12 as compared to 2004 or 2005 when imports were 182 million carats. Correspondingly, exports too have gone down.

 

On the other hand, figures provided by the Shanghai Diamond Exchange (SDE) (Editor: Chinese website) and the Diamond Administration of China (DAC) show that China’s diamond cutting and polishing trade has increased from $600 million in 2007 to $2 billion in 2011 and at the same time, numbers of skilled diamond artisans have increased from 7,000 in 2007 to more than 60,000 in 2011.

 

As a result, India’s cutting and polishing centres have been badly affected with a great reduction in work force due to the new uncertainties. It has been observed that artisans employed by the Indian industry shrank to about six lakh from eight lakh during last five to six years.

 

Apart from India’s domestic problems, China on the other hand is challenging it by committing $6 billion to Congo, $8.4 billion to Nigeria and $16 billion to Ghana as investment in their diamond sectors. Besides, the China Development Bank (CDB) has declared last year that it could invest up to $10 billion in Zimbabwe’s mining and agro sectors. The President of Zimbabwe Mr. Robert Mugabe has opened a new $98-million Military Academy constructed by China last year. The cost of this project is being repaid by Zimbabwean diamonds under a Barter Deal. China is also commencing various multi-billion dollar deals for acquiring rough diamonds in exchange of goods it produces, ranging from medicines, oils, and industrial goods and services.

 

Mr. Dashrath Patel of ‘Samarth Diamond’ which is India’s one of the best promising and dynamic diamond manufacturing companies says, “I honestly feel that India’s government should play a key role in the all-round development of India’s gem & jewellery industry by supporting it through ‘progressive policies’ and by providing a conducive atmosphere for its fast growth. Take for instance examples of Belgium, China and Dubai. None of these countries are producing diamonds but why is Antwerp today the global diamond trading hub and China and Dubai are also on verge of acquiring that status by overtaking India? It is because of supportive policies and strategies adopted by their governments that they are about to take away global diamond business from India. In fact India has the largest force of cheap and skilled manpower but India's share is predicted to drop from 57% to 49% in near future, according to a report by KPMG.”

 

Reflecting Mr. Dashrath Patel’s observations, Mr. Nick Weinstock, a diamond manufacturer from Belgium who has set up a diamond processing unit in Panyu's Shawan jewellery industrial park says, "I have observed that there are two main benefits in establishing a processing factory in China; they are labour costs and the local government’s supportive policies that encourage foreign investments.”

 

So Indian government should take these developments as ‘wake-up call’ and protect its status of a ‘global manufacturing hub’ before trying to acquire a status of ‘global diamond trading hub'.