The diamond industry in India is experiencing significant turmoil, marked by a dramatic fall in the prices of both lab-grown and natural diamonds.
The value of lab-grown diamonds has plummeted from $300 per carat in July 2022 to just $78 per carat, with natural diamonds also seeing a 25-30% price correction.
This downturn has raised concerns about the sustainability of the diamond manufacturing market in India, impacting everyone from diamantaires to small and medium businesses across the sector.
Declining Prices and Oversupply
The past two years have been particularly challenging for the diamond industry, with constant price drops devaluing existing stock. The industry has been forced to execute orders at a loss, exacerbating the financial strain. “Diamond rates have been falling for the past 22 months,” said Ashok Gajera, CMD of Laxmi Diamonds. An increase in rough diamond imports to India earlier this year had indicated a potential recovery, but the oversupply situation quickly dampened these expectations.
Impact of Global Economic Factors
Several external factors have contributed to the market’s decline. The rise in gold prices, economic slumps in the US and other Western countries, and changing buying patterns in China have all played a role. “From 38,000 workers employed in Surat to small/medium businesses and large enterprises, everyone has been hit,” noted Gajera. Demand for smaller, lower-quality natural diamonds has decreased due to competition from lab-grown alternatives. Additionally, demand for high-end natural diamonds has fallen, especially in China, which has reduced its purchasing significantly.
Export Declines
Data from the Indian gems and jewellery sector indicates a downturn in exports. During April-May this year, gross exports of gems and jewellery totalled $4,691.6 million, a 5.9% decrease from the same period last year. Cut and polished diamond exports fell by 15.5% to $2,627 million. Similarly, provisional gross exports of polished lab-grown diamonds also declined by 15.5%, amounting to $204.2 million compared to $241.6 million last year.
Government Interventions and Reactions
The Indian government has reduced the import duty on diamonds from 15% to 6% in the 2024 Budget, which has been positively received by the gems and jewellery sector. However, this reduction has brought challenges for traders holding gold stocks purchased at higher rates. Kanaya Kakad, director of the India Bullion and Jewellery Association’s governing board, remarked, “Traders who hold stocks of gold will suffer losses in the short term—they had purchased at a higher rate but will now have to sell cheap.”
Social Impacts and Support Measures
The crisis has deeply affected the workforce, particularly diamond cutters in Surat, where a series of suicides has been reported. In response, a helpline has been established to support those struggling with the financial and emotional impact of the industry downturn.
