Shri Dinesh Lakhani Global Director.

Greetings to all friends in the industry as we move towards the second half of the year 2023. Together we have all experienced that the last eighteen months have been exceptionally challenging to navigate.

It’s necessary to take a step back and assess a few crucial elements that are not so visible but are extremely impactful.

Recency Bias: clouding the judgement

Recency bias, is a common behavioural trait displayed at an individual or the general industry level – this refers to the tendency to over emphasise the importance of the most recent experiences or the latest information when estimating future events. Recency bias often misleads us into thinking that the future events will be similar to the most recent trends or occurrences.

It is obvious that our diamond industry frequently displays substantial recency bias, just like all the other industrial sectors, particularly when the most recent trend is firmly established. When the overall Cut &Polished demand is strong and growing and other external factors are supportive,it leads to an over positive estimation of the future demand and everything gets overdone including oversupply, overstocking etc. Similarly, during an extended declining demand scenario, there is always a tendency to assume that the demand would keep on decreasing in the future as well. This is the general sentiment which is now prevalent in our industry. Estimating future on basis of only the most recent events is wrong in both the above explained scenarios.

For any planning and strategy to have any meaningful success we have to carefully analyse the present data and facts along with the ongoing changes in the background – that might not be very visible –  to draw correct forward looking inferences.

The Rebalancing – already underway for the last year and a half

We need to take a step back and recognise that this trend of declining demand is about to be reversed. Natural Diamonds have the unique feature of being an emotional and aspirational product and the sales will always be impacted by the cyclicality of the global demand, sentiment and purchasing power of consumers.

There has been an extended period of self-correction and rebalancing which has already happened in the last 15-18 months. It has resulted in drop in supplies and making the entire pipeline light. Also, after a sustained period of financial tightness for the consumers, the global macroeconomic background is becoming favourable for incremental growth in discretionary consumer purchases, supporting C&P demand and pricing.

This rebalancing has been happening owing to the below listed key developments:

The Supply side Manufacturing Scenario: meaningful rightsizing achieved

In the B2B space of our industry, as the C&P demand from end consumers and hence the retailers started coming off by April 2022, the supply side reaction to gradually reduce production began by June 2022. Since then, we have further supply reductions due to few other factors like the polishing capacity being deployed away for other usage and the overall reduction in supply of rough as well. All these factors have been at work for a full one year now and have led to meaningful reduction in supplies. This effect of this supply reduction has already started becoming visible – as we can see that some articles in Small goods (specific sizes in clear goods & general articles in SI below goods) are in short supply even in the current low demand scenario.

The demand side scenario: Global aggregate demand in general and the demand for C&P natural diamonds in particular has bottomed out

The consumption boom after Covid and supply chain constraints led to high inflation across all major economies and it got worsened due to geopolitical factors in 2022. The central banks across the large developed economies raised interest rates significantly – to highest levels seen in the last few decades. This process of tightening of financial conditions and stopping the flow of easy and cheap credit availability is now largely over. Some large developing economies like India are already showing signs of inflation coming under control and other developed market central banks are either done with the interest rate hikes or are going through the last few hikes. Moreover, In China, the central bank and the government have been announcing economic easing measures to support the demand generation.

Separately, our industry has the privilege of selling a product which is aspirational and emotional. The lockdown created a gap in planned weddings and it resulted in much lower-than-average weddings in large markets like China. High value gifting was also negatively impacted over the last year due to high inflation and tightening of financial conditions. This balancing effect of lower consumer spending has been working for over ayear. Now the effect of these factors is getting abated and gradually the aggregate demand is poised to recover along with the demand for Diamond Jewellery for weddings and gifting. Jewellery Retailers have been doing very low procurement over the last 18 months, they would soon have to start planning fresh procurement for the approaching wedding and festive season.

Changes in the procurement models: substantial achievement, Clean Slate ahead

Across the globe, prevalence of technology driven efficient supply chain initiatives and with increasing share of online retailing of jewellery, retailers have been reducing the inventory levels while being able to supply to the same or growing demand. This rationalisation has been working through the supply chains for almost two years now, resulting in low inventory days for most of the large retailers. Planning and procurement shall soon start for the US holiday sales and the approaching wedding & festive season in China and India. Since there is not much excess inventory overhang at the retailer’s level in these markets, any incremental consumer demand coming from the already low base would lead to quick restocking requirements.

Clear signs of Stable Demand and Prices emerging

As one of the clearest indicators of demand having bottomed out, and reduction of supplies over the last year having taken an effect – it has been observed that in a few categories of Smalls, there is already a supply shortage. As this is happening during an otherwise off season, it only shows that the demand has bottomed out and there is undersupply in the market to cater to any future incremental demand growth from the current low base.

“All the factors listed above – partially or fully at work at varying rates – would ultimately lead to firming up of demand for natural diamonds – this confluence of factors is getting all hidden behind the current gloom and doom calling as the recency bias is obviously too strong for participants to be able to see through the fog and envisage how the fundamental factors will play out over the next few months.

If we all take an unbiased and close look at what has happened and what lies ahead, it clearly is a natural and logical occurring rebalancing of oversupply emanating from over exuberance and supply of easy and cheap credit on the demand side, from that point we have now moved on – via the painful process of rebalancing – to significantly curtailed supplies , bottomed out demand drivers waiting to open up one by one and in some markets together as well – leading to a sustainable recovery ahead.”

Unique Product – large emerging market opportunity along with existing developed markets

We should also not forget that our product offering is unique – appealing to sentiments and satiating aspirations – no matter how closest any alternative might be – nothing would ever be as unique, rare and real as a natural diamond. This fact is clearly visible to the end consumer, the value retention of a natural diamond stands out and if as an industry we can clearly showcase the enhanced preimmunises of the product, it would further help the industry to grow sustainably. Amongst all the talk of recession, the reality remains that the Global economy is growing and large pools of population across faster growing emerging markets are attaining much higher purchasing power and a propensity to spend for aspirational purchases. Natural Diamond hits all the right notes and has been a superlative product in the existing large markets of developed economies, this allure and aspirational value carries forward to the emerging markets as well. It very well is one of the topmost choices for aspiration fulfilment.


After having done the hard work of achieving rebalancing we now need be aware of the impact taking hold of the key positive points mentioned above. We need to be confident of the meaningful opportunities ahead and strive to make our product more premium and aspirational.