India’s Love for Gold Turns to Diamonds

By Biman Mukherji and Debiprasad Nayak

Sam Panthaky/Agence France-Presse/Getty Images
A woman tried diamond jewelry at a diamond exhibition in Ahmedabad, Gujarat, Feb. 16, 2012.

Diamonds, it has been said, are forever. But apparently not in India where growing demand and excellent rates of return are leading retailers to offer buy-backs on the gems.

More people are now opting for diamonds rather than plain gold jewelry, according to jewelers, because they offer a greater investment opportunity and are regarded by consumers as more on trend. Diamond solitaires outpaced gold in the stock index by over 10 percentage points in mid-July, further dimming India’s long-standing love affair with gold.

Profit margins on pure gold have shrunk after the government introduced a series of measures to cut dollars spent on imports of the precious metal, including higher import taxes and tougher import procedures, in an attempt to close the current account deficit. On Tuesday, India again raised import tax on gold to 10% from 8%.

India Real Time has more.