India’s diamond industry faces a big setback as the country’s cut and polished diamond (CPD) exports are projected to decrease by 25-30 per cent in the current fiscal year. A report from Care Ratings highlighted that this decline is expected to lead to a multi-year low in export earnings, with estimates ranging between USD 15-16 billion.
The downturn in CPD exports stems from a combination of factors, including a substantial drop in demand from key markets such as the United States and China. These two countries collectively account for approximately 65 per cent of India’s diamond exports, making their downturn particularly impactful.
The Covid-19 pandemic, while initially sparking a surge in diamond jewelry demand during the fiscal years 2022 and 2023, has since resulted in a reversal of fortunes for the industry. Demand began to wane towards the end of 2022, continuing into FY24 despite expectations of a recovery during the holiday season.
One of the primary challenges faced by the CPD industry is the emergence of alternative options, notably lab-grown diamonds (LGDs), which have gained popularity due to their lower cost. This increased competition has further exacerbated the decline in demand for traditional polished diamonds.
Moreover, a significant imbalance between supply and demand has put pressure on diamond prices, leading to price corrections across various diamond categories. Prices have seen declines ranging from 5-10 per cent for smaller diamonds to as much as 20-30 per cent for mid-sized diamonds, impacting the overall export earnings of the industry.
Additionally, the industry has grappled with high inventory levels at the beginning of FY24, coupled with falling prices, resulting in diminished profitability and reduced profit margins for diamond traders and manufacturers alike.
As a consequence, Care Ratings has issued a negative outlook for the CPD industry, foreseeing a challenging road ahead not only for the remainder of FY24 but also extending into FY25.
