Surat Diamond Bourse.
Credit: Surat Diamond Bourse website
By Swansy Afonso and Satviki Sanjay
A new office complex that surpasses the Pentagon in size is set to officially open on Sunday in Surat, cementing the western Indian city’s ambitions to become the world’s diamond capital.
The Surat Diamond Bourse in Gujarat state, which covers a constructed area of 6.7 million square feet (620,000 square meters), became the world’s largest office complex when it was completed in July at a cost of 3200 cr rupees ($384 million). The US landmark, which opened in 1943, has an area of 6.5 million square feet.
The complex in Surat will be inaugurated by Narendra Modi, marking another politically symbolic win for the prime minister in his home state as he seeks support for a third term in elections next year. The bourse’s opening will further build on other efforts by Modi’s administration to boost Gujarat economically, for example by cutting red tape to make it more business friendly.
While Mumbai has long been the center of exports for diamonds in India, Surat, also known as “Diamond City,” dominates in processing of the precious gems, with about 90 per cent of the world’s rough diamonds cut and polished there before they are sold to buyers in places like the US and China. The new bourse aims to centralize the industry under one roof.
“Surat is a major cutting center and a diamond exchange is long overdue,” said Eli Izhakoff, honorary president of the World Federation of Diamond Bourses. “Dealers from all over the world can do business from a secured and centralized place with confidence.”
The new complex is located inside the Diamond Research and Mercantile City, a business district modeled after the Gujarat International Finance Tec-City, or Gift City, another one of Modi’s flagship projects. It has nine 15-story towers and about 4,700 offices. About 130 offices are already in use, according to Nagjibhai Sakariya, president of the Surat Diamond Bourse.
The SDB also dwarfs the Israel Diamond Exchange, which covers 80,000 square meters. However, the Tel Aviv complex not only houses over 1,000 offices but also contains services such as insurers, banks, a post office, a customs office, as well as entertainment, food and religious facilities.
Historically, Surat was one of the most important trade links between India and countries such as Britain, the Netherlands and Portugal because of its proximity to the Arabian Sea coast. It was supplanted by the rise of Bombay as a port in the 17th and 18th centuries.
Its diamond industry started operations about six decades ago, and picked up pace following the discovery of large deposits in Australia and India’s economic reforms in the 1990s. Mumbai, about 280 kilometers (174 miles) south, remained the trading hub due to its better connectivity with the world.
Surat continued to grow as a diamond manufacturing hub, with migrants continuing to flock to the city from all over the country looking for work as polishers. The industry suffered a major setback in 1994 after an outbreak of pneumonic plague in the city, with workers fleeing Surat. Once the outbreak was brought under control, Surat underwent a major overhaul in governance and infrastructure, and is today considered one of the cleanest cities in the country.
Today, in Mahidharpura, Surat’s biggest bazaar, buildings house rows of desks with traders dealing precious stones under bright lamps, and some of them spill out into the streets where they inspect diamonds on cotton sheets. Traders often walk around the city with the stones wrapped tightly in white papers or small pouches sewn onto the insides of their shirts.
The SDB faces challenges in bringing all the businesses under one roof. In Surat, traders currently operating in the bazaar with low overhead costs may be reluctant to relocate into a shiny new office. Mumbai’s Bharat Diamond Bourse faced such growing pains in its initial years, until the 2011 terrorist bombings near the city’s diamond district and the closure of the customs services building accelerated the move by businesses to new offices in the suburban Bandra-Kurla Complex.
Some Mumbai-based diamond businesses may also feel resistant to moving to Surat. While the cost of living is lower there and the concentration of businesses in the new bourse will reduce the need for commuting, the bourse is located on the outskirts of Surat with little in terms of amenities or entertainment nearby. Surat is also poorly connected, with its airport offering only one international flight, to Sharjah in the United Arab Emirates.
Geopolitics is adding another challenge. Many of the diamonds processed in Surat originate from Siberia, and the industry has suffered after the US placed sanctions on a Russian diamond miner following the country’s invasion of Ukraine. A ban by the Group of Seven nations on Russian diamond imports will also finally go into effect on Jan. 1, having been stalled by diamond importer nations and lobbying by the industry.
A recovery in consumer spending in the US and China would be key to reviving diamond sales, Sakariya said, but he added that the current slowdown is just part of the normal cycle.
“The industry is used to it,” he said.