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    A technician inspects a rough diamond at a manufacturing company in Surat, some 270 kms from Ahmedabad on December 6, 2016

    India May Leapfrog Europe, Japan in Diamond Sales

    © AFP 2019 / Sam PANTHAKY
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    Russia to benefit from India's jump to the thirds spot as the burgeoning middle class, rising incomes, and love for jewelry favor continued growth of the diamond industry

    New Delhi (Sputnik) — Rapid urbanization and a burgeoning middle class will make India the third largest diamond market in the world, ahead of Japan and Europe by 2020, according to a US-based global consultancy firm. However, the Narendra Modi government's ongoing demonetization drive to curb unaccounted money and a weaker rupee could offset demand growth in India.

    India is the world's fifth largest market for diamond jeweler after the US, China, Europe and Japan. It is now poised to leapfrog two places, says the Boston-based Bain & Company in its annual report for the sector.

    "We believe India has the potential to be the fastest-growing diamond jewelry market in coming years on the strength of increasing urbanization, middle-class expansion and engagement ring penetration," said the report.

    The demand for diamond jewellery is driven by continued economic growth and disposable incomes. India registered a 7.5 per cent GDP growth rate in 2015 along with a 9 per cent rise in disposable incomes. Further, the number of middle class households in India is expected to reach around 170 million in 2030 from about 50 million at present.

    But, "continued depreciation of rupee could negatively affect market growth rates in US dollar terms over the short-to-medium term," cautions the report.

    The report notes that Indians and Chinese are unique in buying diamond jewelry for ring exchange ceremonies during wedding and expects this trend to continue fueling demand despite a decline in the global supply of rough diamonds due to ageing of mines.

    What may really jolt the growth trend is the Modi government's demonetisation drive. Many leading jewelers have reported a massive decline in shoppers at retail stores. PC Jeweller Ltd., a retail business, has been seeing only about 40 percent of the foot traffic since the demonetization policy on November 8, Chief Financial Officer Sanjeev Bhatia told Bloomberg.

    Even Russia's Alrosa has raised concerns over the impact of demonetization on the diamond industry in India but feels the impact will be temporary. "India's currency reform will lead to a temporary decline in the activity of India's small and middle-size diamond cutting companies, which also affected the low-end small-size rough diamond segment," Yury Okoemov, Alrosa's vice president, said in a statement.


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