20 September 2008

India's Sweatshop Diamonds

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 96-97:
When India had shielded its economy behind tariff walls, its share in world trade had dwindled into insignificance. As mentioned earlier, 'export pessimism' was the prevailing mood at that time. It was not easy to change this mood so only new branches of export production could escape it. Nowadays three new types of commodity account for more than half of India's total exports. Diamond processing was the first and the most unexpected success story of them all. Of course, India had been known as a source of beautiful diamonds in ancient times, but in modern times South Africa has been the leading producer of raw diamonds and the processing is done in Western Europe in places such as Antwerp. Only a few decades ago Jewish merchants controlled almost the entire diamond trade and Jewish artisans participated in the processing of these precious stones. Suddenly a community of Gujarati merchants from Palanpur cut into this trade and made use of cheap and skilled labour available to them in places such as Surat and other towns of Gujarat as well as on the outskirts of Mumbai.

India has to import the raw diamonds; the contribution of its export industry is the value added by expert processing. A breakthrough was provided to this new industry by the creative use of industrial diamonds. Only about a quarter of all diamonds mined are normally fit for jewellery; the rest are passed on to the makers of machine tools for cutting and grinding. Most industrial diamonds are small. Gujarati entrepreneurs knew how to get these tiny stones processed and adopted novel designs of jewellery which sparkled due to the collective effect of many small stones rather than the individual radiance of larger and very expensive diamonds. This created a new market of middle-class consumers who could not afford expensive jewellery. But the Gujarati entrepreneurs also ventured into the market for very precious stones. They even created new brands such as the Nakshatra diamonds endorsed by the Indian actress Aishwarya Rai, a former Miss World.

The buying of diamonds in places like Antwerp is done by the so-called 'sightholders', experts entitled to inspect raw diamonds and select them for their respective companies. Earlier these sightholders were a charmed circle of insiders, but the Gujarati merchants gained access to the circle and now almost dominate it. Eleven of twelve diamonds processed in the world are now processed in India. This, of course, means that the fast growth which this Indian industry registered in recent years is bound to level off. The value of Indian exports of precious stones – mostly processed diamonds – has expanded by leaps and bounds. In 1966 the value of these exports was a mere US$ 25 million; by 2004 it amounted to US$ 14 billion.

India's greatest advantage is the low wage paid for the rather demanding job of diamond processing. The fixture in which the diamond is held during processing is called a dop. With a semi-automatic dop a worker can polish 800 to 1,000 diamonds per day. The wages of Indian workers in this line are about 10 per cent of those earned by their colleagues in Antwerp. This is why more than 800,000 workers are employed in the various workshops in Surat whereas in Antwerp there are only about 30,000 still active in this field. Surat is just one of the Indian centres of diamond processing, though perhaps the largest. The conditions of the workers are generally quite miserable and children are also recruited for this work. Large profits are reaped only by the entrepreneurs, who have now extended the scope of their work to other Asian countries and even to Russia.

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