Indian Diamantaires Likely to Shift Cutting, Polishing Work to Dubai

The US is the largest market for the $10 billion gems and jewellery exports and US exports mainly consist of cut and polished diamonds and studded jewellery. These products face 52.1 per cent tariffs from August 27.

India cut almost 90 per cent of the world's diamonds in volume terms, though the share in value is lower. “Ours is a low-margin business and even a 25 per cent tariff is not viable for us,” said Vipul Shah, former chairman of GJEPC.

Re-routing exports through low-tariff countries like Dubai, Oman, Canada or Mexico may face challenges if the rule of origin rules are strictly enforced by US customs authorities.

According to industry sources, many diamantaires are likely to move to Dubai, which is a large trading hub of diamonds and closer to Surat and Mumbai in the global diamond map. Most of the large diamantaires and several medium firms have offices in Dubai, where these companies already source and trade roughs.

In the past two decades, Dubai has established itself as a diamond trading hub. It acts as a conduit between Africa and Asia in the path of rough diamonds. The lower tax structure, absence of income tax, and currently low US tariffs at 10 per cent provides Dubai an advantage over India, which is known for its cheap and highly skilled labour. With the higher tariffs, India has lost that advantage.

“Companies can even shift part of their existing labour force to Dubai for the processing work. This will help them retain their control in the global cutting and polishing business, which could otherwise go back to Belgium and Israel,” said sources.

However, this would hurt Indian exports as the earnings will not come to Indian shores and several units in India may close, resulting in job losses.

Among the diamond processing companies, small and marginal diamantaires will face a challenging time as they lose their competitiveness.