India Diamond Industry Financing Scandal Is Weighing Us All DownMarch 01, 18
Ironically, following a week or more of articles regarding the $1.8 billion fraud, which has since been increased to $2 billion, allegedly carried out by Indian jeweler Nirav Modi and Mehul Choksi of Gitanjali, the week ended with good news for the Indian economy as a whole. The country has, apparently, taken back from China the title of fastest-growing economy, with a staggering growth rate of 7.2% in the third quarter.
Not that that will help the Indian diamond industry which has been battered by terrible reports about the alleged goings on between Modi, Choksi and the Punjab National Bank. It's difficult to think of more awful publicity for the diamond trade as whole, and the Indian industry in particular.
The possible effect on consumer confidence is so terrifying that it is difficult to contemplate. Let's be honest, many consumers already – wrongly – believe that diamonds and diamantaires are somehow a little dodgy. They have no idea about the hundreds of thousands of absolutely honest people working in the global trade – from mining to retailing – and the good that diamonds do.
Over the past week or two, whatever misconceptions the general public may have had about the diamond and jewelry trade have been proven, in their opinion, to be true for many readers. Tarred with the same brush is the cliché that comes to mind, and in this case that, unfortunately, may prove to be the case. The general press in India has had a field day with this sorry saga. Sorry to say, it has also got a little carried away, adding in all sorts of unfortunate extra commentary.
Using a big name to obtain credit and then diverting those rough diamonds somewhere else while setting lower-quality diamonds and polished synthetic stones in jewelry is what took place, according to Indian media reports. Just the thought of what consumers are likely to make of this causes the head to spin.
And the idea that thousands of people face losing their livelihoods is even more difficult to swallow. Is it really so difficult for top industry players to realize that their actions have consequences for the cogs in their giant machines? Where is the recognition of the responsibility that comes with running a big enterprise? Hardly an international diamond industry conference goes by without a session dedicated to responsibility and sustainability. Are all those discussions and speeches for nought?
It's hardly a secret that financing has become by far the toughest challenge for the diamond industry globally. Banks have withdrawn from the trade and bringing in new sources of finance is incredibly difficult.
Now, banks will have their guards up even higher as a result of the scandal. The credit flow to the Indian industry will inevitably be impacted even though most firms are acting responsibly. Given the importance of the diamond jewelry sector to the overall Indian economy, the effect of the scandal can hardly be overstated.
I've had that sinking feeling ever since the scandal broke. Unfortunately, it doesn't seem like that weight is going to be lifted anytime soon.