India’s diamond industry, a cornerstone of its export economy and a significant employer, is currently grappling with a confluence of challenges that threaten its stability and growth.
Export Decline and Tariff Impacts
The United States, accounting for over 30% of India’s $32 billion gems and jewellery exports, imposed a 26% tariff in April 2025. This move has led to a sharp decline in exports, exacerbating the industry’s woes. The sector, already reeling from weakened demand in China, saw a 14.5% drop in exports in the 2023-24 fiscal year.
Internal Operational Hurdles
Domestically, the industry faces several operational challenges:
- Inventory Issues: Many polishing units are burdened with unsold inventories of polished diamonds, discouraging them from importing new rough diamonds.
- Rising Costs: Increased operational costs, including labour, energy, and materials, have made it difficult for many polishing units to remain profitable.
- Credit Constraints: Tighter credit conditions and reduced lending from banks have made it increasingly difficult for businesses to purchase rough diamonds, further stalling production.
- Quality Concerns: A significant number of cut and polished diamonds exported from India are being returned due to quality issues, overstocking, and price fluctuations, creating costly delays and adding to the strain on exporters.
Shifting Import Dynamics
India’s reliance on Dubai for rough diamond imports has increased significantly. Dubai’s share in India’s rough diamond imports surged from 36.3% in FY 2020 to 60.8% in FY 2024, further rising to 64.5% in April-June 2024. This shift is partly due to India’s high corporate tax regime, which pushes foreign suppliers to route diamonds through Dubai, rendering India’s Special Notified Zones (SNZs) in Mumbai and Surat largely ineffective.
Emergence of Lab-Grown Diamonds
The global market share of lab-grown diamonds has increased, now accounting for 20% of diamond jewellery sales. While this presents opportunities, it also introduces challenges related to pricing, consumer trust, and market dynamics.
Infrastructure Developments
In response to these challenges, India has invested in infrastructure to support the diamond industry. The Surat Diamond Bourse (SDB), inaugurated in December 2023, is the world’s largest office building and aims to centralize diamond trading activities. It houses India’s largest customs clearance center, facilitating more efficient export processes.
Outlook and Strategic Considerations
The Indian diamond industry stands at a crossroads, facing both significant challenges and potential opportunities. Addressing internal inefficiencies, navigating global trade dynamics, and adapting to market shifts will be crucial for the industry’s resilience and growth.
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