The Indian Gem and Jewellery Industry in Tumultuous Times

Summary

The industry is facing significant challenges as diamonds and jewellery exports struggle. Exports of cut and polished diamonds fell nearly 15% year-on-year to ₹1.12 trillion, while overall gems and jewellery exports decreased by almost 10% in FY25. This marks the third consecutive year of decline.

Data Insights

According to Reuters, in FY25 the exports of cut and polished diamonds fell nearly 15% year-on-year, marking the lowest level in two decades with a value of ₹1.12 trillion. Overall gems and jewellery exports dropped by around 10%, and imports of rough diamonds fell by more than 16% year-on-year.

Factors Dampening Trade

The pandemic initially stunted production and trade due to lockdown restrictions. Although “revenge shopping” in the US provided a temporary boost after the pandemic, subsequent sanctions on Russia disrupted the supply of rough diamonds from one of the key suppliers. Declining consumer demand in the US and China, the two largest luxury markets, further hampers exports. Additionally, the imposition of “Liberation Day” tariffs by former US President Donald Trump has added to global uncertainty, although these tariffs have been temporarily suspended for 90 days.

Potential Bright Spots

Despite these challenges, there is some optimism. Exports of gold jewellery have remained resilient, even though they represent a smaller fraction of overall gems and jewellery exports. The industry’s outlook has been improved partly due to the suspension of reciprocal tariffs. Furthermore, exemptions for US imports such as pharmaceuticals and smartphones may suggest potential easing for other export sectors.

Future Challenges for Jewellery Exports

Immediate challenges include the tariffs imposed by Trump and the slow consumer demand in the US and China. Although the US jewellery market saw a 5% growth in 2024, prospects for continued growth remain uncertain. Additionally, the rising popularity of lab-grown diamonds—approximately one-tenth the cost of natural diamonds—has reduced demand and driven down prices, resulting in factory shutdowns in Surat and layoffs among skilled workers.

Industry’s Path to Recovery

Industry representatives are appealing to the Indian government for support and intervention. They are seeking measures such as marketing support for natural diamonds, regulatory guidelines for lab-grown diamond sales, and financial assistance for promotional campaigns. The Gem & Jewellery Export Promotion Council is calling for the establishment of a gems-trading bourse, affordable credit access for small-scale units, and reductions in capital gains tax as well as import duties on jewellery.

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