How the Iran war is hitting India's diamond trade | DW News

Key Concepts

• Surat Diamond Industry: The global hub for cutting and polishing natural diamonds, processing nearly the entire world's supply.
• Supply Chain Disruption: The breakdown of logistics for importing rough diamonds and exporting finished goods due to geopolitical instability.
• Geopolitical Impact: The ripple effect of international conflicts (specifically the war in the Middle East and sanctions on Russia) on local manufacturing economies.
• Economic Vulnerability: The precarious nature of labor-intensive industries that rely on global trade and uninterrupted supply chains.

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1. The Crisis in Surat’s Diamond Sector

Surat, known as the "diamond capital of the world," is currently facing its most severe crisis in 50 years. The industry, which serves as a critical pillar of India’s gems and jewelry sector—employing approximately 5 million people—is experiencing a sharp decline in production and employment.

• Contributing Factors:
  • Sanctions: Western sanctions have restricted the supply of rough diamonds from Russia.
  • Trade Barriers: Tariffs imposed by the U.S. have increased financial pressure on Indian exporters.
  • Geopolitical Conflict: The war in the Middle East has disrupted trade routes, leading to surging shipping and insurance costs.
  • Demand Slump: Even when production occurs, there is a significant lack of demand for polished diamonds in key markets like the U.S., Switzerland, and the UAE.

2. Impact on Labor and Factory Operations

The economic downturn has forced a massive contraction in the workforce. Factories that once employed hundreds have either shut down or significantly reduced their staff.

• Employment Statistics: At one featured factory, the workforce was reduced from 200 to 150, with many remaining employees facing salary cuts of nearly 50%.
• Operational Changes: Many workshops have shifted from 10-hour workdays to 4–5 hours. Small-scale owners, such as Kalpish Damalia, have been forced to downsize operations—in his case, from a 60-person workshop to a single room with 10 workers.
• Financial Distress: Workers report months of unpaid wages, leading to severe household debt and an inability to cover basic expenses like school fees.

3. Human Cost and Social Consequences

The human toll of the industry's collapse is profound, manifesting in extreme financial hardship and mental health crises.

• Case Study (The Makuana Family): The story of Cable Makuana, a former diamond worker who died by suicide after failing to find employment for three months, highlights the desperation within the community. His family was left with €4,000 in medical debt, forcing his mother to pivot to selling handmade souvenirs to survive.
• Mental Health Crisis: According to the Surat Diamond Workers Union, over 80 diamond workers have died by suicide in the city over the past two years.
• Union Perspective: Pawi Stang, Vice President of the Surat Diamond Workers Union, notes that the current crisis is unprecedented, surpassing even the 2008 global recession in terms of its sustained negative trajectory.

4. Institutional Response

There is a notable disconnect between the lived reality of the workers and the official stance of industry representatives. While workers and small business owners describe a "devastated" industry, the Gem and Jewelry Export Promotion Council (GJEPC)—the government body representing the sector—has officially denied the existence of a crisis.

5. Synthesis and Conclusion

The situation in Surat serves as a stark example of how globalized supply chains create extreme vulnerability for local workers. Despite the conflict being thousands of kilometers away, the reliance on international trade routes means that geopolitical instability directly dictates the livelihoods of millions in India.

For many, like the worker Paradia, the industry is no longer a viable path. He has transitioned to driving a taxi, earning a fraction of his former income, illustrating the permanent loss of skilled labor and the erosion of a once-thriving middle-class sector. The future of Surat’s diamond industry remains highly uncertain as long as supply chains remain volatile and global demand stays suppressed.

"The conflict is thousands of kilometers away. But it's us, the poor workers, who are paying the price for a war that is not of our making." — Anonymous Diamond Worker