And now, a race for diamonds

And now, a race for diamonds

India surely needs to speed up in its race with China for hydrocarbons and other natural resources: With its acquisitions in Africa and Central Asia, Beijing has zoomed ahead in this department during the last decade. Now, it seems, there’s competition for diamonds too. And the Indian industry has started screaming for New Delhi to cut Beijing off in this particular race.

Indian diamond traders say that China, through direct deals with African governments, is “locking up the supply of rough diamonds", the Financial Times reported last week. In response, the merchants from Palanpuri want the Indian government to play China’s own game: Offer African nations medicines or infrastructure projects in exchange for diamonds. Else, the $26 billion industry and Surat’s status as a hub—thanks to it, India handles some 60% of the world’s diamond cutting and polishing—will suffer.

Yet, it’s still unclear what challenge China poses for Indian business here. As far back as 2005, when China imported $800 million of uncut diamonds a year, Indian traders were said to be anxious. But trade works in both ways: China, with its size, can be as much a competitor as a market. If China has become the largest importer of diamonds from Antwerp, Belgium, in the January-March quarter this year, India itself exported $6.6 billion worth diamonds directly to China last year. India’s skill in this sector is such that Antwerp traders come to India to celebrate Antwerp Diamond Day.

The trouble is that such concerns usually ask for answers from the demand side: In toys, phones or power turbines, Indian businesses beaten by the Chinese complain and ask for sops. That’s not the answer. The real concern is what India is doing on the supply front. We still don’t seem to have developed a coherent and feasible response to China’s strategy of acquiring natural resources from Africa. Perhaps that means imitating the barter system Beijing has perfected (medicines for diamonds). Or it could involve a different mix of diplomacy and business. For both hydrocarbons and diamonds, developing a sound strategy could go a long way.

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