India Opens Rough Trade

India has passed a law providing a full income tax exemption for foreign companies trading rough diamonds through the country’s special notified zones. As we discussed in last week’s memo, when the law was proposed, the move at last brings India into the diamond trading conversation.

Think of it as India’s version of beneficiation, adding value to its dominant diamond manufacturing sector. Frankly, it’s somewhat of a mystery that India has maintained such a draconian tax regime, preventing the growth of rough trading, until now.

Historically, the presumptive rule was that buyers would travel to wherever they could find rough. That has changed as buyers gained the upper hand in a more cautious trading environment. Today, rough sellers need to do what they can to sell their goods, which means being where the buyers are. Essentially, they’re in India.

The bottom line is that the new law strengthens India’s competitive edge, adds a new dimension to the diamond pipeline, and gives mining companies greater access to the world’s premier manufacturing center.

Already, a government delegation from Namibia has visited Mumbai to explore potential rough sales in India.

“We have invited Namibia to bring its rough diamonds to India and utilize the new tax framework for trading through the special notified zones. This will give Indian manufacturers, particularly micro, small and medium enterprises, direct access to high-quality rough without the cost and complexity of sourcing overseas. We are very positive that, with this new policy, a greater share of Namibia's diamond trade can come directly to India. We are exploring an MoU and discussions are progressing in a very positive direction.” 

• Anoop Mehta, convener of the Diamond Panel at the GJEPC and chairman of the Bharat Diamond Bourse. 

This blog first appeared in the August 17 Pressing Matters Executive Memo. Read the full memo here, Pressing Matters.

Image: Kirit Bhansali, chairman of the GJEPC, and Shaunak Parikh, its vice chairman, met India’s finance minister Nirmala Sitharaman express the industry’s appreciation for the government’s tax reform aimed at positioning India as a global rough diamond trading hub. (GJEPC, Solitaire International).