India’s Diamond Industry Faces Export Slump Amid Global Headwinds

India’s diamond industry has recently been in the news due to a significant 17% decline in exports in FY2024–25, falling to $13.3 billion. This downturn is largely attributed to the imposition of fresh U.S. tariffs ranging from 10% to 27% on Indian diamond exports, severely affecting trade flows. Additionally, the global demand for natural diamonds has weakened due to inflationary pressures and growing competition from more affordable lab-grown diamonds. Despite these challenges, India continues to dominate the global diamond cutting and polishing sector, with Surat as its epicentre. In response, the Indian government is actively promoting lab-grown diamonds and sustainability measures to revive and future-proof the industry.

Historical Background

India has a long-standing association with diamonds, tracing back to ancient times when Golconda mines were among the few sources of diamonds globally. Historically, diamonds were both mined and traded in India, with the subcontinent being a key global supplier before the discovery of mines in Africa and South America. The modern growth of the industry began post-1950s, aided by liberalized trade policies and the entrepreneurial spirit of communities in Gujarat. A significant turning point came during World War II, when Burmese (Myanmar-origin) diamond cutters and traders migrated to India, bringing essential skills and expanding the artisanal base. Over the decades, this helped establish a vast, decentralised network of diamond cutting and polishing units, particularly in Gujarat.

Major Diamond Centres in India

1. Surat: The epicentre of diamond cutting and polishing, Surat processes over 80% of the world’s diamonds by volume, employing skilled artisans and using cutting-edge technology.
2. Mumbai: Functions as the commercial and export nucleus, housing the Bharat Diamond Bourse (BDB)—one of the world’s largest diamond trading hubs.
3. Bhavnagar and Navsari: Secondary hubs in Gujarat that support Surat’s operations.
4. Jaipur: Specializes in coloured gemstones and jewellery crafting, contributing to export diversification.

Economic Significance of the Diamond Industry in India

1. Major GDP Contributor: The diamond industry is a vital component of India’s gem and jewellery sector, which contributes approximately 7% to the national GDP.
2. Top Export Earner: Diamonds constitute over 10% of India’s total merchandise exports, making the sector a key foreign exchange earner after petroleum products.
3. Employment Generator: The industry provides employment to over 5 million people, both directly and indirectly, especially in MSME-dominated segments like cutting and polishing.
4. MSME Backbone: Thousands of small and medium enterprises (SMEs) form the backbone of the diamond value chain, ensuring inclusive economic participation and decentralised growth.
5. Urban Industrial Growth Driver: Cities like Surat and Mumbai have witnessed rapid urban and economic development, driven significantly by diamond-related activities and ancillary services.
6. Support to Ancillary Sectors: The diamond industry supports allied sectors like precision tools, logistics, design, training, and certification services, boosting overall industrial productivity.
7. Resilience and Export Adaptability: Despite global headwinds, the industry has shown adaptability in export markets by diversifying into Lab-Grown Diamonds (LGDs) and exploring new trade partners.

Technology and Innovation in India’s Diamond Industry

1. Shift to Automation: The industry has adopted laser cutting machines, CNC tools, and robotic arms, replacing manual processes to enhance speed and precision.
2. AI-Driven Processes: Artificial Intelligence (AI) and data analytics are being used for rough stone valuation, quality control, and yield optimisation.
3. Robotic Innovations – Fenix: Robotic systems like Fenix automate large-scale cutting operations, reducing human error and boosting production efficiency.
4. Digital Workflow Management: End-to-end digitisation enables better tracking, inventory management, and streamlined global supply chain operations.
5. Blockchain Integration: Blockchain is being introduced to ensure traceability and authenticity, especially for ethically sourced or conflict-free diamonds.
6. Smart Sorting & Grading: Computer vision and machine learning technologies are being used for accurate grading, sorting, and flaw detection.
7. R&D Investments: Leading firms and research bodies are investing in in-house tech labs, developing proprietary tools and systems for diamond optimisation.

Lab-Grown Diamonds (LGDs) – India’s Emerging Strength

1. Global Leadership: India is now the largest exporter and second-largest producer of Lab-Grown Diamonds (LGDs) after China.
2. Growing Global Share: India holds approximately 16% of the global diamond market, with LGDs representing the fastest-growing segment.
3. Cost Competitiveness: LGDs offer a 30–40% cost advantage over natural diamonds, making them attractive for price-sensitive global buyers.
4. Eco-Friendly Branding: LGDs are promoted as sustainable and ethically sourced, aligning with the global push for green consumption.
5. Rising Demand in Export Markets: International consumers, particularly in the U.S. and Europe, are embracing LGDs for their environmental appeal and affordability.
6. Policy Push and Infrastructure: Government recognition of LGDs under PLI schemes and research grants is encouraging domestic production.
7. Future Outlook: By 2030, LGDs could make up 25% of global diamond sales, presenting India with major export diversification opportunities.

Export Trends and Challenges in India’s Diamond Sector

1. Decline in Export Value: In FY 2024–25, India’s diamond exports fell to $13.3 billion, marking a 17% year-on-year decline.
2. Tariff Barriers in Key Markets: U.S. import tariffs ranging from 10–27% have hurt India’s price competitiveness.
3. Geopolitical Disruptions: The EU and G7 bans on Russian rough diamonds—previously a major source—have impacted raw material availability.
4. Global Demand Slowdown: Inflation, changing fashion trends, and economic uncertainty in top markets are driving lower consumer demand for diamonds.
5. Forecasted Contraction: ICRA projects a further 7–10% decline in exports in FY 2026, indicating continued global headwinds.
6. Lab-Grown vs Natural Price Gap: The growing LGD market is putting price pressure on natural diamonds, affecting revenue in the traditional segment.
7. Currency Volatility & Logistics Costs: Rupee fluctuations and increased shipping costs due to global crises (e.g., Red Sea tensions) have further strained margins.

Way Forward

1. Boost R&D in Lab-Grown Diamonds (LGDs): Invest in indigenous technologies and R&D centres to scale LGD production, reduce import dependence on seeds, and lower input costs.
2. Strengthen Ethical and Sustainable Branding: Promote eco-certifications, responsible sourcing labels, and blockchain-based traceability to appeal to conscious global consumers.
3. Expand Trade Diplomacy and Market Access: Engage with the U.S., EU, G7, and Gulf nations to secure favourable tariff regimes, avoid sanctions, and diversify export destinations.
4. Promote Domestic Consumption: Launch awareness campaigns and offer consumer financing options (e.g., EMI schemes) to boost jewellery demand in Indian metros and Tier-II cities.
5. Develop Jewellery Parks and Design Ecosystems: Establish plug-and-play jewellery parks, design incubation centres, and export clusters to move up the value chain from rough to retail.
6. Skill Development and Inclusion: Expand skilling initiatives through institutes like the Indian Diamond Institute (IDI) and increase female workforce participation, especially in polishing, quality control, and retail.
7. Green and Circular Practices: Incentivize carbon-neutral processes, recycling of diamond waste, and renewable energy use in production to align with global ESG standards.