India is the world’s largest centre for processing rough diamonds, accounting for 95 per cent of the world’s polished diamond output. However, the exports of cut and polished diamonds (CPD) have been declining due to the high inflationary pressures across major diamond-consuming markets. According to a report by CareEdge Ratings, CPD exports may end the fiscal with a decline of around 15 per cent.
In 2021-22, CPD exports grew to USD 24.43 billion while in 2022-23 it declined marginally to USD 22.04 billion. The report attributed the steep fall in exports to the rising prices of gold and other precious metals, which have made diamond jewellery less affordable for consumers. Consequently, CPD exports plunged 32 per cent during the first four months of the current fiscal as compared to the year-ago period.
The agency expects CPD exports to decline about 10-15 per cent to about USD 19 billion this fiscal. This would reduce India’s share in the global diamond market, which was around USD 80 billion in 2022. The US alone accounts for over 50 per cent of polished diamond consumption1, followed by the UAE, Hong Kong, and Belgium.
Lab-grown diamonds gain popularity
While natural diamond is going through a temporary disruptive phase, green shoots appear in the lab-grown diamond (LGD) segment. LGD are synthetic diamonds that are produced by chemical vapour deposition or high-pressure high-temperature methods. They have similar physical and optical properties as natural diamonds, but are much cheaper and more environmentally friendly.
Exports of LGD jumped around 41 per cent in the last four years ending FY23, as these are much cheaper than natural diamond. Given the favourable demand outlook, coupled with large additions of capacities, LGD exports are expected to cross USD 3 billion by FY26. LGD are mainly exported to the US, China, Europe, and Japan.
LGD have also gained acceptance among consumers who are looking for ethical and sustainable alternatives to natural diamonds. LGD do not involve any mining or conflict issues, and can be customized according to the preferences of the buyers. LGD are also certified by various grading agencies such as International Gemological Institute and Gem Certification and Assurance Lab.
Challenges and opportunities for Indian diamond industry
The Indian diamond industry faces several challenges such as high import duty on rough diamonds, lack of direct access to rough diamond sources, competition from other countries like China and Vietnam, and regulatory issues related to quality and taxation. The industry also needs to invest in technology and innovation to improve efficiency and quality of production.
However, the industry also has some opportunities to leverage its strengths such as skilled workforce, low labour cost, strong domestic demand, and established reputation in the global market. The industry can also benefit from the government initiatives such as Make in India, Atmanirbhar Bharat, and Production Linked Incentive schemes. The industry can also explore new markets such as Africa, Latin America, and Southeast Asia.
The Indian diamond industry has a long history of excellence and resilience. It has overcome many challenges in the past and emerged stronger. It can do so again by adapting to the changing market dynamics and consumer preferences.