The coronavirus outbreak could dampen the export of cut and polished diamonds from India.

China accounts for 14 per cent of polished diamonds consumption and around 35 per cent of the exports from India are routed via Hong Kong, Icra said in a study.

“The export of polished diamonds to China is largely routed through Hong Kong, which is a major global diamond trading hub along with Belgium and the United Arab Emirates. Industry estimates China and Hong Kong to be accounting for around 35 per cent of India’s overall cut and polished diamonds exports. This is slightly ahead of the US, the largest market for diamond studded jewellery. Thus, Icra estimates the domestic industry to be majorly impacted,” said the report.

According to data from the Gems and Jewellery Export Promotion Council, the export of cut and polished diamonds from the country between April 2018 and January 2019 at Rs 13,6942.27 crore was down 16.04 per cent over the same period a year ago. According to the industry, the demand that is already subdued is expected to be further affected.

“The recent rescheduling of the Hong Kong International Jewellery Show from March to May and the shutdown of manufacturing activities owing to coronavirus has been a big blow to domestic exporters. Diamond exports are likely to be impacted. If the virus is not contained by the first quarter of fiscal 2021, orders and subsequent exports could witness further pressure,” Crisil said in a report.

Icra said the challenge has been compounded further as the shutdown took place during the Lunar New Year, extending from January 25 to February 8, 2020.

“There has been a complete retail shutdown or slowdown in some of the worst impacted provinces of China; the like to like retail jewellery sales in the region may have declined by as much 70 per cent,” said Icra.

“If the business lockdown continues in China and Hong Kong, industry pressure will aggravate, impacting cash flows. This can have a serious bearing, especially given the cautious lending to the sector and potentially impact domestic players’ credit profile,” said Jay Sheth, vice-president, corporate ratings, Icra Limited.