Indian consumers may not get the benefit of falling global rough diamond prices. Though, in the secondary market, rough diamond prices have fallen but at the retail level polished prices have not come down.

This in turn has slowed down the offtake of diamonds temporarily in India.

Vipul Shah, chairman, Gem and Jewellery Export Promotion Council (GJEPC) said: "Rough diamond prices have fallen by 4-5% in last fortnight. There has been a pressure from the retail end to bring down prices. So prices have come down. But the entire benefit of this drop cannot be passed on to the consumer because of rupee dollar fluctuation" Beginning March, prices of rough diamonds had appreciated by 15% as the miners had increased prices.

The supply side of diamond is under strain globally as no new mines are coming up. India is a leading polishing and cutting hub of diamonds in the world. Diamonds manufactured in India constitute 65% by value, 85% by volume and 92% by pieces of the world diamond production, making the country not only the leading global manufacturer but also one of the highest consumers of rough diamonds in the world.

In the first two months of the current fiscal, India had exported cut and polished diamonds worth Rs19,757.35 crore, a 44.34% growth over the same period last year. This increase has been largely due to rupee getting weaker than dollar. Jignesh Mehta, founder and managing director of Divine Solitaire, said that the profitability of the diamond manufacturers have come under stress as rough diamond prices have gone up.

"Miners have not reduced prices. Since there is a liquidity crisis in the market now the secondary players, which comprise traders only, have to reduce prices. But at the retail end there has been no impact on prices as the diamond manufacturers cannot reduce prices as their profitability is under strain." But jewellers like Gitanjali said that the Indian diamond story remain intact even at higher prices.

"We have seen that during April and May there had been huge offtake of plain gold as well as diamond jewellery. This was driven largely by the falling prices of gold. In the last fortnight there has been a slowdown in offtake of diamond jewellery. But that is a temporary phase and from early August we will again see a pick up in demand," said Mr Mehul Choksi, chairman and managing director of Gitanjali group.

Dinesh Navadiya, president of Surat Diamond Association, said that the small and medium diamond manufacturers are facing duty to liquidity problem. "They have to buy diamond from the open market and are forced to buy at a premium. They units are struggling for their survival. There are 2,500 such units in Surat," said Mr Navadiya.