This would help to reverse Russia's recent decline in exports, which has resulted in India becoming the largest polishing hub in the world. However, currency risks are making this endeavor more difficult.
And since April, Russia has reduced the number of supplies that it sends to India by forty percent, which has resulted in a reduction in the number of goods that India exports to other countries.
The diamond trade in India is now experiencing difficulties as a result of the risks associated with the fluctuations of the Indian rupee in comparison to other currencies, particularly the United States dollar.
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This is made worse by supply issues that are related to Russia, which is one of the major diamond-producing countries in the world.
Diamond traders in India are already contending with the effects of a slowdown in the economy around the world, and the total combined impact of these factors is adding to the pressure they are under.
Currency risks are making it more difficult for diamond traders in India to buy more rough diamonds from Russia and reverse the country's recent decline in exports, which has left India as the world's largest polishing hub.
In addition, according to the Gem and Jewellery Export Promotion Council, there is not a single jeweler has taken advantage of a unique facility that was established in July to make it possible for business transactions to be conducted in rupees.
The chairman of the council, Vipul Shah, was quoted as saying in an interview that nobody is willing to take the exchange risk and volatility. Regarding the gems and jewelry industry:
The Russians are not comfortable with the rupee invoicing as far as the gems and jewelry sector is concerned.- Vipul Shah
As a result of the fact that Russia's Alrosa PJSC is responsible for approximately one-third of the world's rough-diamond supply, the $80 billion-a-year industry was thrown into disarray in 2017.
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Diamond cutters, polishers, and traders were scrambling to find a way to continue buying from Russia even though their banks were unable or unwilling to finance payments. Nevertheless, there is still a problem with supply overall, despite the fact that some Indian businesses have continued to make covert purchases from Russian miners.
The fact that no payments are being made to Russia means that the supply situation has not improved, according to Shah. In addition, he stated that in order to increase the availability of rough stones:
We are in constant dialog with the Russian government, the Indian government, and Russian miners.- Vipul Shah
Even though there is a risk of sanctions as a result of the conflict in Ukraine, India continues to purchase oil, weapons, and other goods from Russia despite the fact that it views Moscow as a close political and economic partner.
On Monday, the government of that country announced that it was engaging with Russia to resolve issues on the local currency payment and that it anticipates a pick-up in trade activity in the near future.
In the meantime, Shah stated that the council was asking the Indian government if they can import Russian diamonds directly on a government-to-government basis for export purposes but the government also has to balance global relations.
Given that the country's diamond exports dropped 7.7% year-on-year during April-December to a total of $16.6 billion, any increase in supply would be very welcome. As a result of weak demand from key consumers like the United States and China, it is estimated that shipments will remain unchanged in the year that will end in March.
In spite of the fact that exporters have been obtaining goods directly from De Beers and mines from Botswana and Angola, demand from China has remained relatively low, according to Shah. Even though there is a shortage of supply, it is not as severe as it once was. However, "once we start seeing the demand picking up, then supply will be a real pain for us," he said.
Additionally, the industry is lobbying for lower import taxes on precious metals and lab-grown diamond seeds in advance of the federal budget that will be presented in India the following month.