MDMA - A Dominant Force in Diamond Trade
By Rajesh Bajaj

India’s connection with diamonds stretches back several millennia. But some of the most dramatic changes in the Indian diamond industry took place over the last four decades or so. A large, amorphous industry with no icons and no image for anyone to picture, hauled itself out of obscurity and from a fragmented collection of cottage industry workers into the world’s largest diamond workforce. Not only that, the Indian diamond industry now makes and retails diamond jewellery to consumers all over the world. Documenting that transformation, driven by the industry’s ability to collectively organize itself reveals how the industry’s evolution has come full circle to be one of the world’s few conglomerates that can actually generate trends and drive sales. MDMA looks back on the four decades of change in the diamond industry it was privileged to chronicle.

The Indian diamond industry’s full history is well known, stretching all the way back to the famed Golconda mines and the first understanding of how to cut a diamond. But the growth and continuing evolution of the current behemoth that leads the country in its overseas trade, is a result of organization rather than just the result of an historic start. In that sense, the story of the modern Indian diamond industry goes back more than a century ago to a fateful meeting in 1909 of the elders of the Jain community in the town of Palanpur in Gujarat. The elders decided that the best way for the community to haul itself out of poverty and climb to a more secure future was for its young men to plunge into the process pipeline of the diamond industry — at that time almost exclusively servicing India’s many royal houses as well as its British colonial masters. The community elders were not exactly stepping into an unknown void. Two entrepreneurs from Palanpur, Amulakh Khubchand Parikh and Surajmal Lallubhai Mehta, had already blazed the way in the diamond industry, starting out in the closing years of the 19th century and having established successful operations based in Mumbai at the time of the Palanpur community meeting. Also, dealing was seen by the community as an honourable profession. Thus at the impetus of the community elders, more Palanpuri youngsters made the journey to Mumbai, each reaching out and helping a group of young, impoverished men from their community, giving them a place to live while they learned to either cut and polish, sort or sell diamonds. The society and family ties that those pioneers had in great measure have helped craft the global success story of the Indian diamond industry. Those ties played an important role in keeping the Indian diamond industry alive in the years after India achieved independence. Indian Diamonds are adjudged 60 percent by value,85 percent by volume and 93 percent by the number of pieces.

In the period soon after R day India realized difficult finance balance of foreign currency asstes compelling import ban of diamonds in adversitymost of the palanpuri families sought opportunities moving in to Antwerp establishing as diamond dealers.

There are now about 1000 diamond units in and around Palanpur, employing about 70000-80000 artisian. Kirtibhai Doshi, recalls the names of some early Palanpur firms. Mohanlal Raichand & Company, K.S. Doshi & Company, Nagindas Lallubhai & Company Chimanlal Manchand & Company, Manilal Rikhavchand, Thakorlal Hiralal, Kirtilal Kalidas, Bhaichand Vardhaman, Raichand Ugamchand. He also recalls leading brokers Himatlal Kothari, Vadilal Amulakhbhai and Dinkarlal Laxmichand Kothari. Diamond Manufacturing was started from 1956. Kirtibhai and his son Shreyasbhai established their present firm, Shrenuj & Company in 1969. The first to have introduced laser processing equipment in India. Mafatlal Mehta around 1965 he and his son Jitendra, set up their own firm, Jitendra Brothers in Mumbai. Jayam PVBA in Antwerp. Mafatlal Mehta’s another son Madhubhai joined them. Later on they launched Samir Diamonds in Mumbai. Paras Diamonds in New York in 1975.

Again, it was the Indian industry’s collective organization ability that saved the day. Led by S.G. Jhaveri of London Star, a group of Indian diamond dealers put together what would become the replenishment (REP) license system. The government approved and the REP system became the engine that drove growth in the Indian industry over the next two and a half decades. Also feeding the growth of the Indian diamond processing prowess was the overseas diaspora of Indian diamond dealers, particularly the rough resellers who had made Antwerp their home.

Very early on, the Indian diamond industry realized that the key to the growth of the cutting industry was a steady supply of raw material. Pioneers such as Mahendra Parikh, Ketan Parikh Mafatlal Mehta, Kirtilal Manilal Mehta, Vijay Shah, Dilip Mehta, Kaushik Mehta and all migrated to Antwerp to ensure that they would be able to keep up a steady supply of rough for their own family businesses as well as the growing number of Indian cutting shops. So well did they succeed at this task that they were all honoured by the Belgian diamond industry and even showered recognition by the Belgian government.

The ability to cut even the most impossible rough gave the Indian industry a clear edge over other cutting centres. The ability meant that almost all of Australia’s Argyle mine production was cut and polished in India. When the mine began production in December 1985, some 95 per cent of its output was considered non-gem or industrial quality. Not only that, the geological forces that had formed the mine also triggered conditions that meant that the crystal structure of the diamonds in the deposit was skewed, making the diamonds almost impossible to cut and polish while also giving them a brown body colour.

The success behind India’s lucrative diamond processing business lies in and by natives of Palanpur town & village in Banaskantha district in Gujarat, West India. The Jains are a historic and successful “business community” and are known for hard work, honesty, skill and entrepreneurship. People of this close-knit community of Palanpuri town have been actively involved in the diamond business for years carrying on their legacy of secrecy, honesty and informality and have built this highly expensive and risky business based on trust without any written agreement. Diamonds worth millions of dollars are traded on mere handshake, just verbal agreement, surprisingly with minimum security measure. The highly successful people have set up diamond polishing, cutting and sales centers in Antwerp, Belgium, Tel Aviv, Israel, USA and China also. The Palanpuri Jains have turned the scattered cottage industries into a Rs. 90,000.00 crore enterprise. Jains began to travel to Antwerp in 1970s, the world’s biggest trading hub for rough diamonds Antwerp, has 60 percent Indians in the cut and polished diamond trade. Previously the industry was dominated by Jewish traders.

In 1869 one such pioneer was Amulakh Khubchand Parekh who gradually introduced 100-200 young Palanpuris in this business. So did Surajmal Lallubhai Mehta in 1895. By the way the Union Government introduced in early 1960s its new policy to promote diamond exports based on imported roughs to earn foreign exchange and generate employment opportunities in the process, an army of Palanpuris was ready with the requisite training and expertise to avail of that opportunity. Kirtilal Mehta started his independent business which gradually grew into the Gembel Group with offices in Mumbai(1944), Antwerp(1952), Hong Kong(1956), Tel Aviv(1968), and New York(1973). Until independence, Imports of cut and polished diamonds into India were allowed.

In the last few decades Londan star Diamond Company, Gitanjali Exports Corporation, Suraj Diamond (India) Ltd, Mahendra Brothers, D. Navinchandra & Company, Kantilal Chhotalal, M.R. Bhansali & Company, Dimexon, P.D. Kothari & Company, C. Mahendra Exports, Asian Star Company Ltd, Mohit Diamonds.

By 1955, when the Indian rupee had established enough to warrant the easing of some restrictions, collective representation by the diamond industry helped negotiate a fixed import license system. The Indian industry could import a fixed volume of diamonds every year. Naturally, as business grew, this system got in the way. “Creative” ways were found around this hurdle, and the Indian diamond industry increased the pace of its growth.

The First Indian Sight By the 1960s the collectively organized industry’s abilities played a key role in helping De Beers, who at that time had a lock hold on the world’s rough diamond supply, in making up its mind to appoint its first Indian Sightholder in 1962. The Indian Diamond Export Corporation, which is recorded as the first Indian Sightholder, was in fact a consortium of a trio of dealers — Mohanlal Raichand, H.B. Shah and Hashamali Jhaveri. They were the thin edge of an Indian entrepreneurial wedge that would open up the global diamond industry.

Others from the community followed. Kirtilal Manilal Mehta, who as a boy of 12 began dealing in rubies in what was then Burma, moved later to Mumbai and into the diamond industry, building up what would become Gembel, a global diamond powerhouse.

In 1941, Kantilal Chhotalal established his eponymous firm. He would go one to become a Sightholder as well as the first true chronicler of the Indian diamond industry. More followed later. In 1960, a 19-year-old Arun Mehta, was given seed money of Rs. 10,000 by his father Ramniklal to set up his own diamond processing venture. With his maternal uncle Bhanuchandra Bhansali, Arun Mehta set up B. Arunkumar and Company, the precursor to today’s world-leading Rosy Blue. Kirtilal Doshi, whose father Kalidas Sankalchand Doshi had established Shrenuj & Company in 1906, leveraged the firm’s emerald and jewellery business into a diamond powerhouse that quickly gained a De Beers Sight. Dineshbhai Bhansali established Bhansali & Co. in 1963.

Babusha Parikh set up what has grown to be today’s giant Mahendra Brothers in 1960. Kirtilal Kalidas, the eponymous firm set up by Kirtilal Kalidas Mehta, who had begun selling diamonds in Coimbatore in 1929, integrated backwards into diamond processing when Pankaj Mehta set up Dimexon in 1964.

Post world war, market peace reinstated.

In the 1960s, a resurgent United States of America, with a whole generation of “baby bloomers” finding increasing prosperity after the disastrous years of the Great Depression followed by World War II, provided the backbone for the growth of the Indian diamond industry. The birth of the suburban shopping mall was taken advantage of by the pioneers of credit jewellery sales — the Zale corporation. Allowing consumers to pay for their jewellery in manageable installments and locating their stores in the new retail format of the shopping malls that mushroomed all over the US catapulted Zale into quickly becoming the country’s largest jewellery retailer.

The Zale partnership with the Bhansali family, the first direct tieup between a US firm and an Indian producer, helped catapult Indian diamond exports. The Bhansalis took a big chance — they sent Zale’s chief buyer Allen Ginsburg parcels of small diamonds without any prior contact and without an actual order being placed. The bet paid off. Zales, with its expanding network of retail outlets and subsequent expanding need for small diamonds, quickly forged an alliance with the Bhansalis.

That partnership also brought to the fore another, equally important facet of the Indian diamond industry — its enthusiastic participation in philanthropy and charity. With the Bhansalis putting in some $700,000 and the Zale Corporation another $300,000, the million-dollar 200-bed Mahatma Gandhi-Abraham Lincoln Hospital opened in 1981 in Deefa, some 20 km from Palanpur. The hospital’s goal was to provides very low-cost medical care to the people of the region. It still does that today. Dozens of other philanthropic institutions and initiatives by the Indian diamond industry are also active today.

The 1960s, however, provided the springboard for the growth of the Indian diamond industry. Mafatlal Mehta, whose father was one of the elders at the 1909 meeting in Palanpur, also received a De Beers Sight. As his son Mahendra “Madhu” Mehta, who was one of the original groups to receive a De Beers Sight reminisced in an interview in the 1980s, his first allocation was to the tune of $5,000. Still, that beginning was significant. De Beers realized that Indian cutters could turn otherwise worthless rough into saleable gems. The term “near gem” was coined and India’s total diamond exports in 1963 were estimated at just under $5 million and by the time of the formation of the GJEPC in 1966, that figure had more than tripled.

Diamond dawn follows the OPEC dusk

The 1970s brought the US delinked the dollar from its gold reserve while the formation of the Organization of Petroleum Exporting Countries (OPEC) suddenly imparted a shock to fuel prices. Meanwhile, the consumer boom in the US had pushed polished diamond prices up beyond inflation levels. With a stock market that was unable to keep pace with this rapid increase in value, it was but natural that consumers began to look at diamonds as an investment category.

The early 1970s saw the price of large, 2-carat-plus diamonds increasing by stunning leaps of between 20 and 30 per cent per annum, while even the quarter caraters showed price increases of between 5 and 8 per cent. The world was seeing its first “investment diamond” boom. Rough diamond resellers in Antwerp made killings of up to 50 per cent premiums without even opening their Sight boxes.

The bankruptcies in other diamond processing centres allowed the Indian industry to move upwards in the size and quality of diamonds it manufactured as it had the financial strength to take in the slack left by the financial failures. More organised manufacturing and the large-scale implementation of semi-automatic technology also meant that Indian manufacturing quality and yields had improved significantly.

Trade Fair Boosts Economy. The show renamed the India International Jewellery Show (IIJS) the IIJS is among the world’s four largest gem and jewellery industry trade shows. And Bharat Diamond Bourse, Granted World federation of Diamond Bourses WFDB membership

Hollywood Promotion.

De Beers had to make a fresh the way to develop a diamond tradition would be to develop a series of diamond jewellery brands that imbued the product with some specific emotion. Together with De Beers’famous umbrella campaign — “A Diamond is Forever” — translated into several Indian languages, Nakshatra was relatively modestly priced and gave diamond jewellery a safe entry into the Indian market. Gentleman prefer blonds a hoolywood has a popular song:Diamonds are a girls best friend.

It also built up consumer valuations of diamonds in India. De Beers followed this up with three other brands — Sangini, which built on the idea of a mature partnership between a man and a woman with the imagery of a life mate who has stayed through thick and thin; Asmi, which targeted the self-purchase market for successful professional Indian women and Arisia, which showcased the large, solitaire diamond in the traditional format as a vehicle that transmitted value through time.

The move by the as big a Sightholding firm as Gitanjali Gems into not only branding its own jewellery but also retailing it, set the next phase of the growth of the Indian diamond processing industry. Against all traditional wisdom, the Indian jewellery brand has made a decisive place for itself both in the domestic as well as international markets.

Realising that it now needs to make the transformation to an industry that is fully integrated from diamond mine to consumer market, the GJEPC has now embarked on a drive to establish the “Make In India” label as something that is synonymous with quality and design leadership. This need to establish the country’s design and quality credentials over its already firmly established manufacturing prowess is the driving force behind the India International Jewellery Week. Just as the Milan Fashion Week is designed to underscore the prominence of Italian design, so the IIJW is showcase for the Indian industry’s abilities to not only manufacture quality product, but to also drive consumer demand through design innovation and product development that is tailored to the dreams and aspirations of today’s global consumer.

Like the rest of the diamond industry worldwide, the Indian industry has now adapted and adjusted itself to the new political realities of Africa. Many of the big firms have moved to set up cutting and polishing factories in Botswana, Namibia and South Africa to help those African nations fulfill their social and political ambitions in having as much value added to the diamonds mined there, before they are shipped further down the process pipeline and eventually into global consuming markets. And in keeping with those same realities, the Indian industry, which reached out to De Beers and its Central Selling Organisation (CSO) in London almost half a century ago, has now adapted to the idea that it will be receiving its Sights from Gaborone in Botswana. Despite the fact that there is currently no direct flight to Gaborone and requires a stopover in Johannesburg to make the connection, this is the new reality of the global diamond industry and those are the rules that will have to be followed. In keeping with this, the Indian industry has also told Rio Tinto that its almost ready new mine in Bandar in India in which India will have to develop a sales system that gives Indians the right of first refusal before the rough diamonds are shipped to world distribution and processing centres. It stands to reason that the minerals from India should beneficiate the Indian industry first.

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