Gujarati Traders and the Global Diamond Trade

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If you own a diamond, the odds are overwhelming that it was cut and polished in a single Indian city. Surat, on the Tapi river in southern Gujarat, processes the large majority of the world's diamonds by number of stones, and the industry there employs several hundred thousand people. The rough stones themselves come from Botswana, Russia, Canada, South Africa and Angola. The finished stones are sold in New York, Hong Kong, Dubai and Antwerp. The middle of that chain, the labour intensive work of turning an unremarkable pebble into a faceted gem, sits almost entirely in Gujarat, and it got there through a diaspora network that is worth understanding on its own terms.

The pivotal community is small and specific. Palanpur is a modest town in Banaskantha district in northern Gujarat, and its Jain merchant families had traded in gems for generations, historically in coloured stones and pearls. In the middle decades of the twentieth century, members of these families established themselves in Antwerp, the Belgian port city that had been the world's dominant centre for rough diamond trading since before the Second World War and whose trade was then largely in the hands of Jewish merchant houses, many of them devastated by the Holocaust. The Palanpuri Jains moved into rough dealing, and over several decades became one of the dominant groups in the Antwerp diamond district around the Hoveniersstraat, near the city's central station. That district still concentrates a very large share of world rough diamond trade in a few tightly secured streets.

Why the work moved to Gujarat

The decisive commercial insight was about small stones. Diamond cutting had traditionally been a high skill, high wage craft practised in Antwerp, Tel Aviv and New York, and it paid only for stones large enough to justify the labour. An enormous volume of small and near gem quality rough was therefore uneconomic to process at all. Indian cutters, working at far lower wages, made those stones worth cutting. Beginning in the 1960s and accelerating through the 1970s and 1980s, the rough was shipped to Gujarat, cut in workshops in Surat, Navsari, Bhavnagar and Amreli, and exported as polished goods. The industry absorbed migrant labour from the Saurashtra region, particularly Patidar and other farming communities leaving drought prone districts, and grew into a mass employer.

What made the chain work was trust rather than paperwork. A rough parcel worth an enormous sum could be handed over on the strength of a word, because the parties were bound by kinship, community, marriage and reputation, and expulsion from that network was commercially fatal. Goods moved between Mumbai and Surat through angadias, private couriers who carried parcels by train under an informal but highly reliable system predating modern logistics. Credit was extended on the same basis. Economists who have studied the trade point to it as a textbook case of an ethnic network solving contracting problems that formal law handles poorly, since the value of a diamond is hard to verify, disputes are hard to litigate across borders, and the goods are trivially easy to steal.

Institutional infrastructure caught up later. India's polished exports were long routed through Mumbai's crowded Opera House district until the Bharat Diamond Bourse opened at the Bandra Kurla Complex in 2010, consolidating trading offices, customs clearance and secure vaults on one campus. In December 2023 Surat opened its own vast trading complex at Khajod on the city's outskirts, a building publicised as the largest office complex in the world by floor area, intended to let Surat trade finished goods directly rather than sending everything to Mumbai. Whether the trade actually relocates is not yet clear, since traders have been slow to leave established Mumbai networks.

Shocks, and an uncertain decade

The industry's structure changed at the source as well. For most of the twentieth century the rough market was controlled by De Beers through a single channel selling organisation that bought up production and released it to a restricted list of buyers, known as sightholders, in take it or leave it parcels. Competition regulators, new producing countries and independent mines eroded that control from the late 1990s, and the sightholder list was reorganised, with Indian firms gaining direct access to rough on a scale they had not had before. Several large Indian houses now buy rough directly, cut it, and sell polished goods under their own brands, capturing far more of the value chain than the original cutting contractors did.

Regulation arrived too. The Kimberley Process Certification Scheme, launched in 2003 after campaigning over diamonds funding African civil wars, requires shipments of rough to travel with a certificate of origin. India is a participant and is a major processing hub within the system. The scheme is widely criticised for defining conflict diamonds narrowly, covering only stones financing rebel movements against legitimate governments, and therefore excluding abuses by state forces or in mining conditions generally.

Two more recent shocks have hit Surat hard and simultaneously. The first is sanctions. Russia was a leading supplier of the small rough that Surat's industry was built on, and Group of Seven measures restricting the import of Russian origin diamonds, phased in from 2024, disrupted supply and created a burden of proof about provenance that a trade built on informal handling was ill equipped to satisfy. The second is laboratory grown diamonds, which are chemically and optically diamond and can now be produced at scale. India, and Surat especially, became a major producer of them, but their arrival has compressed prices for small natural stones, precisely the segment Surat depends on. Wholesale prices for natural polished goods have fallen sharply, Surat has seen extended factory shutdowns, reduced working weeks and job losses, and reports of severe distress among workers have prompted state intervention.

What happens next is contested. One view holds that lab grown stones will settle into a separate, cheaper category, as cultured pearls did, leaving natural diamonds a smaller but stable luxury market. Another holds that consumers will not maintain the distinction and that natural diamond demand faces structural decline. Surat has advantages either way, since the cutting skill, the machinery and the labour force apply to both materials, and the same city that captured the world's cutting work by being cheaper may capture the synthetic market by the same route. But the community networks that carried Gujarati traders from Palanpur to Antwerp were built for a trade in scarcity, and scarcity is exactly what is now in question.

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