Surat's diamond industry faces third crisis in 17 years

On Raksha Bandhan day in 1938, the Tapi river played havoc in Surat, tossing around boats and sending 84 people into the watery grave.

- AJINKYA KAWALE

Since then, the Surtis (residents of Surat) observe the festival one day after its calendar date, in remembrance of the tragedy.

This year, it is an onslaught of another kind in the famed diamond city, an onslaught of heavy tariffs, clouding most festivities.

The United States' (US') reciprocal tariffs, coupled with penalties, threaten the livelihood of artisans.

Surat is the world's hub for diamond finishing, and over 90 in 100 diamonds globally are polished. The job is done by nearly 800,000 artisans, employed in about 5,000 diamond-cutting and -polishing units.

For unit operators and diamond merchants alike, the US remains the largest export destination, with more than three in every 10 diamonds polished in India finding their way to American retail chains.

In April, the Trump administration imposed sweeping reciprocal tariffs on India, levying a 26 per cent duty, which took effect this month, on the export of gems and jewellery. Adding to the blow, the US piled on another slab of tariff, driving the effective rate on gems and jewellery to 55 per cent starting August 27.

On the other hand, diamond-polishing and -cutting companies typically earn a single-digit profit margin, 4-8 per cent, say industry observers.

Not surprisingly then, within days, demand for diamonds plunged by up to 40 per cent, with merchant partners struggling to secure orders from a shrinking US customer base.