The export-dependent diamond processing industry, 80 per cent of whose earnings come from the US, is one among the sectors most vulnerable to the rising rupee. However, the industry hopes that the emerging export destination would help it weather the storm.

The worst hit would perhaps be diamond processors who held their stocks for future exports and kept receivables for adjusting in the next rough diamond import orders.

"The rupee appreciation has already affected the sector badly. The scenario will worsen if the trend continues. At present, the quantum of effect cannot be ascertained," said Gems and Jewellery Exports Promotion Council Chairman Sanjay Kothari. He, however, expressed the hope that the rupee's rise will abate soon.

Diamond is an import-based industry. The industry imports rough diamonds from different parts of the world, the latest to join the foray is the African countries. Hence, in order to minimise the impact of rupee appreciation, traders book their order of rough stones at the prevailing currency rate. Rupee appreciating more than 10 per cent since last year June-July when it was hovering at 47 against the dollar. Learning a lesson from the past, traders booked rough diamond in adequate quantity to minimise the risk.

Of the total exports, the value of rough diamond imports works out to roughly 73 per cent and value addition of 27 per cent. Hence, a 5 per cent of rupee appreciation would affect value addition and not the imports, thus taking an overall percentage of impact to roughly 1.5 per cent which is quite minimal," said Vasant Mehta, vice-chairman, GJEPC.

But, the quantum was huge when considering the profit margin of about 6-7 per cent. The impact remained identical, he added.

With the appreciation of rupee, India-made products would become expensive in the overseas market and, hence, exports would face stiff competition from other countries such as Israel.

But, India has explored new destinations to keep the momentum going. The recently explored destinations, Commonwealth of Independent States and Japan, have witnessed a good demand of Indian designs. GJEPC has also explored African countries as a possible alternative to Antwerp to source rough diamond in adequate quantity.

The council is likely to continue selling medium- and low-priced jewellery to the CIS countries and a mix of all product ranges to Japan.