Understanding India’s Diamond Exports and Market Challenges

Understanding Diamond Exports from India

Diamond exports refer to the sale of diamonds from India to various international markets. India stands out in the diamond industry, particularly for its expertise in cutting and polishing diamonds. Key cities like Surat are pivotal in this process, exporting both natural and lab-grown diamonds, along with gold and other jewellery items.

Importance of the Diamond Industry for India

The diamond and jewellery industry significantly contributes to India's export economy. It provides employment opportunities to numerous workers, particularly in regions such as Gujarat and Maharashtra. Furthermore, India ranks among the top exporters of cut and polished diamonds globally, which is vital for the nation’s economy.

Recent Trends in India’s Diamond Exports

In the fiscal year 2024–25 (FY25), India has witnessed a sharp decline in diamond and jewellery exports:

• Cut and polished diamond exports have decreased by nearly 15%.
• Total gems and jewellery exports experienced a decline of over 10%.
• Imports of rough diamonds fell by more than 16%.

This marks the third consecutive year of declining exports, raising concerns within the industry.

Reasons for Export Decline

Several factors contribute to the decrease in diamond exports:

• The COVID-19 pandemic disrupted production and trade flows.
• There has been a post-COVID drop in demand, particularly from the US and China.
• The ongoing Russia-Ukraine conflict has impacted the supply chain of rough diamonds sourced from Russian mines.
• US tariffs under the previous administration have increased costs for Indian jewellery in the American market.
• Lab-grown diamonds are increasingly replacing natural diamonds due to their lower prices.

Segments of the Jewellery Trade Performing Well

Despite challenges in the diamond sector, certain areas within the jewellery trade are performing better. Gold jewellery exports have shown more stability compared to diamonds. Although it constitutes a smaller portion of the jewellery market, it provides essential support. Recently, the US has paused some tariffs, offering temporary relief to Indian exporters.

The Future of Jewellery Exports

The jewellery industry is currently facing significant challenges. Consumer demand is slowing down in major markets like the US and China. Additionally, the rise of affordable lab-grown diamonds is squeezing the market for natural diamonds. Many factories in Surat have shut down, resulting in job losses for skilled workers.

Strategies for Reviving the Diamond Industry

Industry stakeholders are advocating for several measures to revive the diamond sector:

• Promote Indian natural diamonds on a global scale.
• Establish regulations for the marketing and sale of lab-grown diamonds.
• Provide financial assistance to small exporters in the industry.
• Implement tax relief measures and reduce import duties.
• Invest in branding initiatives and support large-scale trade exhibitions.

Frequently Asked Questions (FAQs)

Q1. What are diamond exports?
Answer: Diamond exports refer to the sale of diamonds from India to other countries. India specializes in cutting and polishing diamonds, especially in cities like Surat, and exports them to markets like the US and China.

Q2. How important is this industry for India?
Answer: The diamond and jewellery industry is crucial for India's exports, providing employment to millions and contributing significantly to foreign currency earnings. India is a top exporter of cut and polished diamonds worldwide.

Q3. What has happened to India’s diamond exports recently?
Answer: In FY25, India’s diamond exports saw a sharp decline, with cut and polished diamonds falling by nearly 15% and total gems and jewellery exports down over 10%, marking three consecutive years of falling exports.

Q4. Why are exports declining?
Answer: Declining exports stem from COVID-19 disruptions, reduced demand, geopolitical conflicts affecting supply, US tariffs increasing costs, and competition from cheaper lab-grown diamonds.

Q5. What can help revive the diamond industry?
Answer: Revival strategies include promoting Indian natural diamonds, regulating lab-grown diamond sales, offering financial support to small exporters, providing tax relief, and investing in branding and trade exhibitions.

UPSC Practice MCQs

Question 1: What is a significant reason for the decline in India's diamond exports?
A) Increased global demand
B) COVID-19 disruptions
C) Improved trade agreements
D) Rise in natural diamond prices
Correct Answer: B

Question 2: Which city is known for diamond cutting and polishing in India?
A) Mumbai
B) Surat
C) Delhi
D) Ahmedabad
Correct Answer: B

Question 3: What has impacted the supply of rough diamonds recently?
A) Domestic production increases
B) Russia-Ukraine conflict
C) Export tariffs by India
D) Decreased labour costs
Correct Answer: B

Question 4: What has been a recent trend in the jewellery trade?
A) Increased exports of lab-grown diamonds
B) Stable gold jewellery exports
C) Declining demand for gold
D) Rising costs of natural diamonds
Correct Answer: B

Question 5: What is one proposed solution to help the diamond industry?
A) Limiting exports to the US
B) Promoting Indian natural diamonds globally
C) Increasing tariffs on imported diamonds
D) Reducing the workforce in the sector
Correct Answer: B