India's diamond market loses sparkle

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The merchants still turn up - hoping customers will return By Zubair Ahmed BBC News, Surat, Gujarat

It is a unique spectacle: nearly 5,000 small-time diamond merchants sitting and chatting, all in one place.

The merchants are here - but their trade is not sparkling.

The global recession has plunged the famous Mini Bazaar in India's diamond city of Surat in Gujarat state into a severe financial crisis.

The issue is a burning one in India's current general election.

Just a few kilometres from here stands a glass and steel building that houses a diamond cutting and polishing workshop with state-of-the-art gadgetry.

Rough diamonds and other unworked gems are brought here. In a few days they are transformed into sparkling, shiny and delicate pieces.

The sounds of polishing and chiselling contend with one another, but they are intermittent, suggesting the flow of work is drying up.

Up to December 1,500 people came to work here. Today only 300 come, the rest have lost their jobs due to the global slump in demand for diamonds.

Of the 700,000 skilled workers attached to the diamond industry in Surat, 250,000 have been laid off.

'Cash crunch'

The dusty, crowded and almost ugly Surat was exporting $20bn worth of diamonds and precious gems to the US and Europe every year.

Hundreds of thousands of workers have lost their jobs and today they have no money to look after their families Suresh Bhai, poll candidate

But now the industry says it has shrunk to between 30% and 40% of its original size.

Hundreds of small and medium-sized merchants have either already sunk or are on the verge of going down.

Mukesh Shah, who has been in the trade for eight years, says he has been without work since Diwali, the festival of lights, in November.

"I have done no work. Faced with a severe cash crunch, I sold my flat for 600,000 rupees ($12,000) to feed my family."

Deepak Patel, too, is a small merchant and comes to the Mini Bazaar every day, hoping business will return to normal.

"We know customers have stopped coming, but we still come here in the hope they may come back."

The alarming rise in unemployment has stunned the city.

Students learn diamond cutting - but will they get jobs?

Suresh Bhai, who polished diamonds in a local factory, was laid off late last year. Instead of sitting idle and doing nothing, he decided to highlight the industry's plight by contesting the parliamentary elections.

During his whirlwind election campaign on a bicycle, he declares: "I decided to stand in the elections to draw the nation's attention to the hundreds of thousands of workers who have lost their jobs and today they have no money to look after their families."

Surat goes to the polls on the last day of April in the third of the five-rounds of voting. Despite the doom and gloom, Suresh Bhai is upbeat and confident he has the support of the majority of the electorate.

But with virtually no money to spend on campaigning and with Surat a stronghold of the Bharatiya Janata Party, which rules Gujarat state, does he have any hope of winning?

"You wait and see. I will win by 50,000 votes."

Levies

Winning is perhaps a tall order for Suresh Bhai.

KK Sharma, who heads a diamond cutting and polishing institute in Surat, says: "He will of course not win. But he may have already achieved his goal of highlighting the problems faced by the workers."

The opposition to BJP strongman and Chief Minister Narendra Modi in Gujarat is generally feeble.

Surat bucks the trend. The diamond industry is upset with Mr Modi for not helping it out of its misery.

Many diamond merchants in the Mini Bazaar believe the state government could have bailed them out with an economic package.

The criticism of Mr Modi here is shrill and strong, with most regarding him as a politician long on promise but short on delivery.

This is despite Mr Modi's reputation of being industry and business friendly.

Wealthy diamond exporters such as Shrikant Sanghvi offer a more considered view.

They say the state government does not levy duties and, therefore, does not benefit from the exports as much as the federal government.

"Why would the state government help when it doesn't earn money from the exports?" he asks.

The industry needs help and urgently. Who provides it is fairly academic for the hundreds of thousands of diamond workers and merchants of Surat.