Much has been said about India’s rapid rise to dominance in the diamond industry, but it’s probably best illustrated by some statistics recently offered by De Beers managing director Gary Ralfe.

Ralfe told analysts that while 1 million people are employed in the Indian industry, there are fewer than 50,000 diamond workers in the entire rest of the world. This means that 95% of the world’s workers in diamonds are employed in India.

With statistics like that, most Indians concluded long ago that their country’s market share in the diamond industry had reached a ceiling. So for the last few years, their focus has been on growth in complementary areas—particularly jewelry.

Of course, this is old news. What is new is how India has matured as a jewelry manufacturer. The country has made remarkable strides in marketing itself and getting its products accepted by overseas retailers (assisted in no small part by the Indo-Argyle Diamond Council). India’s jewelry industry is no longer just a synergistic sideline—it’s a full-fledged business in itself.

$20 billion? Today, the disagreements in India are not over whether the jewelry industry will continue to grow, but at what rate.

“We see great strength in this industry,” Indian Minister of Trade Shri Kamal Nath said during a press conference at the recent India International Jewelry Show. He hopes the industry will reach $20 billion in exports by 2007—far more than what industry leaders think is achievable. “We think the industry is ready for a quantum leap,” he said.

But it’s not just jewelry manufacturing that is flourishing in India. Jewelry consumption is expanding as well. India’s domestic market is now the third largest in the world. A country that once consisted almost entirely of haves and have-nots now has a burgeoning middle class, and De Beers’ advertising has been effective in persuading Indians to switch from gold—their traditional preference—to diamonds.

“Gold jewelry is considered to be old-fashioned,” noted one local newspaper, Business Line. “More and more consumers are expressing a strong desire to possess and wear diamonds.”

Most diamond pieces fit into a category called “fusion jewelry,” where, as Business Line put it, “the core design concepts are Indian, but the styling, the finish, and the metals used are Western.”

In the Indian market the principles of the Diamond Trading Company’s Supplier of Choice plan have been seen in action—particularly its embrace of brands. De Beers has persuaded its sightholders to sponsor three distinct brands, which it helped conceive and market (something that, for antitrust reasons, it has been reluctant to do in the United States). The most popular brand, Nakshatra—from an astrological term meaning “birth star”—consists of low-end ear studs and pendants, for pre- and post-wedding purchases. It has been an unqualified hit, increasing store traffic by some 78%, the Diamond Promotion Service says.

“Nakshatra has shown a lot of people how big the market in India can be,” says Paras Mehta of Dimexon, a sightholder. “It opened a lot of people’s eyes.”

There is also Asmi, built around a concept similar to the American market’s right-hand ring. Meant for the Indian “woman of today,” Asmi (Sanskrit for “I am”) features elegant curves studded with tiny diamonds with a bigger stone as its core. The diamonds are set in white or a combination of white and yellow gold.

The third and highest-end brand is the Arisia Solitaire collection, geared toward the growing ranks of India’s upper class.

Duty calls. Most of the jewelry consumed in India is produced there as well—mostly because a 20% duty on foreign jewelry makes it costly to buy imported goods. Yet the recent Indian International Jewelry Show drew a surprising 107 international exhibitors. And it’s a testament to the industry’s confidence that it’s asking the government to remove the duty.

“If overseas manufacturers are offering better items at better prices, the consumers should have the option,” says Sanjay Khotari, chairman of the Gem and Jewellery Export Promotion Council. “Let it be survival of the fittest. It is a big market and there is room for everybody. Indian manufacturers are not afraid. The time of protectionism from the West is gone. We don’t need protection.”

Challenges. That doesn’t mean the Indian industry doesn’t have challenges ahead—particularly on the supply side. Australia’s Argyle mine, a main supplier to the industry, is currently deciding whether to mine underground. If it doesn’t it will close, and even if it stays open it will likely mine half its current capacity. That would make it harder to get small goods—which even now are not easy to find. Khotari thinks this will eventually squeeze middlemen out of the business.

“People who do not have direct access to rough material will have a problem,” he says.

There are also threats to India’s manufacturing hegemony from China—which also has a low-wage but highly skilled work force—and diamond-producing countries, particularly those in Africa, which desperately want a cutting industry like India’s. (See “Could Africa Cut Out De Beers?” JCK, October 2004, p. 94.) Recently, the Gem and Jewellery Export Promotion Council sponsored a trade mission to Namibia to discuss the possibility of getting more direct rough supplies. They got a cold shoulder, mainly because Namibian politicians feel the days of exporting its resources to be processed elsewhere are over. (A visit to Ghana went better.)

Still, even if producing countries do venture into manufacturing, most Indians think they will have a long way to go before they challenge India. One reason is that the country’s labor costs are far below even those in Africa. India also is more experienced.

“To move manufacturing to producing countries, it’s a huge task that will take a lot of effort,” says Vikram Shah, CEO of C. Mahendra. “You need the infrastructure and the right people. Will they get the same percentage of yield? Will they get the same prices? Even if you get the knowledge, it takes people with experience to make the knowledge work.”

Which is why, all in all, most Indians are confident about the future.

“The Indian market is maturing and showing a new level of professionalism,” says Shehzad Zaveri of Minawala Jewels. “People think India is all about cows and elephants. Now they see it’s a modern country.”