India diamond industry still shaken

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When three bombs tore through Mumbai in July, the blasts scattered scores of diamonds being carried by traders as they rushed to safe deposit boxes on their way home. After frantic panning of drains, sewers and monsoon puddles, about 65 were recovered.

The industry plans to auction off any that can’t be returned to their rightful owners, with the proceeds going into a fund for victims of the blasts and their families.

The coordinated bombings, which killed 26 people in the biggest attack against India’s financial capital since late 2008, when a three-day siege killed 166, also staggered the country’s diamond-cutting and polishing industry, the world’s largest.


“Everyone is worried, upset, perturbed,” said Sanjay Kothari, vice president of the 5,000-member Gem & Jewelry Export Promotion Council. “Terrorists may have wanted to hurt the economy. But we’re not lying low.”

One effect of the attack may be a move that the insular, tradition-bound industry has resisted: an accelerated relocation to the fortress-like Bharat Diamond Bourse — Bharat means “India” in Hindi — in suburban Mumbai.

“Most of the diamond industry is allergic to change,” said Anoop V. Mehta, the bourse’s president. “This business is still old-fashioned, done with a shake of the hand. They haven’t moved on.”

The multibillion-dollar industry still transacts million-dollar deals in rabbit-hutch offices around Opera House, a dilapidated British Raj-era music hall, with brokers haggling over gems on sidewalks below.

Diamonds worth a fortune are carried in vest pockets by unarmed, shabby-looking couriers mostly from Gujarat state, north of Mumbai, from families so interwoven that few dare steal anything because the community opprobrium would be so great.

Despite calls to upgrade security around Opera House, it has remained haphazard even after the attack. A deliveryman glides past a checkpoint with a stack of dented lunchboxes known as tiffins — investigators believe one of the bombs at another gem market was hidden in a tiffin — as workers genuflect to an elephant god statue in the main Panchratna building lobby beside a beeping but ignored metal detector.


Nine miles away, the $225-million, 20-acre Bharat exchange boasts a fenced perimeter, 2,500 security cameras, 600 guards and airport-style baggage screening, but very little sign of business.

Industry leaders predicted when it opened last fall that it would be full within months. Nearly a year later, only a few major diamond exporters have moved in.

“Smaller companies aren’t happy with the new center,” said Paresh Shah, 47, a diamond broker. “It’s far from the train station, which is dangerous when you’re carrying diamonds after dark.”

And although land was earmarked for the bourse in 1984, infighting, construction setbacks and budget problems meant it took 26 years to build, or, as one local newspaper noted, “longer than the Taj Mahal.”

Many traders live near Opera House and bridle at the suburbs’ inconvenience and higher rents. And despite its size, even at full capacity, the bourse could handle only 2,500 of the industry’s estimated 5,500 companies.

But Mehta believes momentum is shifting, helped by security concerns in the wake of the recent attack. “Once the head of the herd moves, everyone else moves,” he said.


Some, however, see the inertia as symptomatic of broader problems in this glittering Indian industry. In the United Arab Emirates, Dubai built a competing exchange in a fraction of the time, they note, and Chinese diamond dealers are coming on strong.

“It’s an open world,” Kothari said. “We must worry.”

Traditionalists counter that Indian family connections and global diaspora will keep India’s trade ahead of competitors for years to come.

“It’s also a business built on trust,” said Harshad Shah, 52, a diamond broker who was standing near the Opera House blast site. “People don’t trust the Chinese. You can’t do business with them on a handshake.”

Jay Parikh, a partner in diamond exporter Ketan Brothers and a U.S.-educated grandson of the founder, said the industry needs to upgrade its thinking, security and skill set.

Although some offspring return to family firms after college, most prefer to go into finance these days or more prestigious, challenging corporate jobs. “It’s not rocket science,” Mehta said.

Theories on why the diamond district was targeted in the attack include a desire to damage India’s economy, a revenge move by criminal gangs or a sectarian strike against the industry’s primarily Hindu workforce.


Others point to anger and frustration related to India’s rising wealth gap and the millions who may never own a motorcycle, let alone a diamond.

“Seventy percent of Mumbai lives in slums,” Mehta said. “There sure are enough disgruntled people around. Something must be done at a social level to address this. The balance just isn’t right.”