Export returns have increased, but the industry is struggling with a large inventory of unprocessed rough diamonds. This surplus is due to fewer orders and increased competition from lab-grown diamonds. Ajay Srivastava, the founder of GTRI, highlighted the severe impact on the sector: “This has triggered defaults, factory closures, and widespread job losses. Tragically, more than 60 people in Gujarat’s diamond sector have committed suicide, reflecting the severe financial and emotional strain India’s diamond sector is facing.”
The think tank’s data indicates a 24.5% drop in rough diamond imports, falling from USD 18.5 billion in 2021-22 to USD 14 billion in 2023-24. Net imports, after accounting for re-exported rough diamonds, declined by 25.3%, from USD 17.5 billion to USD 13.1 billion. Exports of cut and polished diamonds saw an even sharper decline of 34.6%, from USD 24.4 billion in FY 2022 to USD 13.1 billion in FY 2024.
GTRI reported that the share of unsold diamonds returned to India increased from 35% to 45.6% over this period, causing net exports of cut and polished diamonds to drop by 45.3%, from USD 15.9 billion to USD 8.7 billion. The difference between net rough diamond imports and net cut and polished diamond exports widened from USD 1.6 billion in FY 2022 to USD 4.4 billion in FY 2024, signaling a significant inventory buildup.
Several factors contribute to this crisis, including regulatory issues, internal inefficiencies, and weakening demand in key markets like the US, China, and Europe due to economic uncertainty, inflation, and geopolitical tensions. Srivastava noted, “Fluctuations in global diamond prices have caused uncertainty, with buyers hesitant to purchase rough diamonds in anticipation of further price drops.”
The global diamond supply chain has also been disrupted by the Russia-Ukraine conflict, with sanctions on Russia affecting trade. Shifting consumer preferences towards lab-grown diamonds are another challenge for the sector.Internally, many polishing units face high unsold inventories, rising operational costs, and tighter credit conditions, which have led to shop closures and layoffs. Srivastava also pointed out issues such as the return of significant portions of cut and polished diamonds due to quality problems and overstocking.Additionally, Dubai’s share in India’s rough diamond imports has been steadily increasing, while Belgium’s share has declined. High corporate tax rates on foreign suppliers in India have pushed them to re-export diamonds to Dubai before they are sent to India.
To support the sector, GTRI recommends extending export credit terms, exempting foreign rough diamond sellers from corporate tax in India, regulating the lab-grown diamond industry, and reconsidering zero-tariff import of cut and polished diamonds from Dubai under the India-UAE trade pact.
India’s diamond industry includes over 7,000 companies, mainly concentrated in Surat and Mumbai, employing about 1.3 million workers directly and supporting millions more in related sectors.(With PTI inputs)