Exports are projected to fall another 17 to 20 per cent in the current fiscal year to about USD 11 billion, a report notes
As higher tariffs in the United States and waning global demand add to mounting pressures, India’s cut and polished diamond (CPD) industry is bracing for its steepest decline in exports in two decades according to CareEdge Ratings.
Exports are projected to fall another 17 to 20 per cent in the current fiscal year to about USD 11 billion, extending a downturn that has already eroded revenues, profitability and liquidity across the sector. India processes around 90 per cent of the world’s polished diamonds by volume, leaving global buyers heavily dependent on its supply.
The industry, which typically operates on thin margins, has been hit by a series of setbacks: the rise of lab-grown diamonds (LGDs), weaker consumer spending in key markets, and tariffs of up to 50 per cent levied by Washington earlier this year. The US is the largest consumer of diamonds globally, accounting for more than 40 per cent of demand, and a direct buyer of 37 per cent of India’s polished diamond exports in FY25.
“Tariffs increasing to 50 per cent by a key diamond-consuming nation are expected to exacerbate the demand sluggishness in the CPD industry,” said Akhil Goyal, Director at CareEdge Ratings. “The industry continues to face competition from LGDs, and there is limited offsetting potential from alternative markets such as India and China.”
CPD exports dropped 17.5 per cent year-on-year to USD 13.3 billion in FY25, CareEdge said. The decline reflected not only weaker US demand but also a prolonged slump in China, where the diamond jewellery market shrank 57 per cent between 2021 and 2024. Diamonds’ share of China’s jewellery market slid to 6 per cent in 2024, while gold jewellery surged to 73 per cent, underscoring shifting consumer preferences.
The Rise Of LGDs
The rise of LGDs has compounded the problem for natural diamond players. Chemically and visually identical to mined stones but sold at steep discounts, LGDs have attracted younger consumers with their affordability and ethical appeal. Globally, LGD jewellery now accounts for about 20 per cent of diamond jewellery sales, with the US making up 70 per cent of the market in 2024.
India, already a global leader in diamond processing, has leveraged its infrastructure to capture a growing share of the LGD segment. Exports of polished LGDs reached USD 1.27 billion in FY25, equivalent to about 10 per cent of CPD exports. Although export values slipped nearly 10 per cent year-on-year due to falling prices, volumes rose, signalling growing acceptance.
Still, LGDs offer limited relief against the broader slump in natural diamond demand. Domestic consumption in India, now the world’s second-largest diamond jewellery market, has grown in recent years, fuelled by higher disposable incomes and demand from Tier-II and Tier-III cities. But this growth is from a low base and remains insufficient to offset export losses, particularly as high gold prices restrain discretionary jewellery spending.
To weather the crisis, Indian diamantaires have scaled back production, explored new geographies such as Europe, and sought greater penetration in the domestic market. Some are also considering relocating processing units to countries with lower tariffs if trade conditions remain restrictive.
Industry players have responded by curtailing procurement of rough stones, reducing inventory, and relying more on local production of LGDs. “Maintaining lean inventory levels has become a strategic priority across the value chain,” CareEdge’s Director Ujjwal Patel noted. “This provides some cushion to manage liquidity and reduces default risks despite weak profitability.”
The Way Forward
CareEdge estimates that the industry’s rated portfolio generates about Rs 48,000 crore in combined income, supported by relatively low leverage and working capital-based debt. Around 85 per cent of rated entities are investment grade, with comfortable debt coverage metrics. However, profitability and credit profiles are expected to weaken under prolonged tariff pressure.
Globally, miners have also trimmed production to avoid a supply glut, but inventories remain elevated as demand lags. Rough diamond output fell to its lowest levels in years, excluding the pandemic, forcing producers to revise output plans.
The structural shift driven by LGDs differentiates the current downturn from past cycles such as the US-China trade war or the Hong Kong crisis, CareEdge said. With retailers increasingly favouring synthetic stones, Indian midstream players are under pressure to cut prices to move inventory, eroding margins further.
The ratings agency maintains a negative outlook for the sector, warning that export earnings will remain under pressure unless trade barriers ease or global demand improves. For now, the world’s largest diamond processing hub faces the prospect of weaker growth, lower profitability, and an uncertain future.
