Currency risks are impeding Indian diamond sellers’ attempts to get additional uncut goods from Russia and alleviate an export downturn in the world’s largest polishing hub. Since April, supplies from Russia to India have decreased by 40%, which has resulted in a decline in exports from the Asian country. Moreover, according to the Gem & Jewellery Export Promotion Council, only a few jewellers have used a special facility established in July to enable the trade to be handled in rupees.
Vipul Shah, the council’s chairman, stated in an interview that “nobody is willing to take the exchange risk and volatility.” The Russians are uncomfortable with rupee invoicing in the gem and jewellery sector.
The $80 billion-a-year rough diamond sector, dominated by Russia’s Alrosa PJSC, was rocked last year as cutters, polishers, and traders looked for ways to continue purchasing from the country even though their banks were unable or unwilling to fund payments. While some Indian businesses continue to acquire covertly from Russian miners, the overall supply situation is still problematic.
Shah claimed that “the supply situation has not improved” because “no payments are getting into Russia.” To increase supplies of rough stones, he continued, “We are in continual communication with the Russian government, the Indian government, and Russian miners.” Despite the prospect of sanctions brought on by the conflict in Ukraine, India, which views Moscow as a key political and commercial partner, buys goods from Russia, such as oil, ammunition, and commodities. Its government stated on Monday that it was negotiating with Russia to settle disagreements regarding the local currency payment and anticipated that trade would resume shortly.
Shah added that the council was “asking the Indian government if they can directly import Russian diamonds on a government-to-government basis for export reasons,” However, the government also needed to maintain a balance in the world’s relations. Any increase in supply would be good, given that the country’s diamond exports plummeted to $16.6 billion from April to December, a 7.7% year-over-year decline. Due to sluggish demand in the US and China, two important consumers, shipments are predicted to remain unchanged in the year ending in March.
The exporters have been receiving products straight from De Beers and mines from Botswana and Angola, but Shah stated that demand from China has remained relatively high. Although the supply gap is not as severe, “supply will be a huge headache if we start seeing the demand picking up,” he said. The sector is also asking for a decrease in import duties on precious metals and lab-grown diamond seeds ahead of India’s federal budget next month.
In 2021, Russia produced more diamonds than 39 million carats, a rise of about eight million carats from the year before.
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