Representational file image.
| Photo Credit: Vijay Soneji

India’s export of cut and polished diamonds is projected to decline by 22% to $17.2 billion in the current fiscal due to weakened demand from the key consuming nations, according to rating agency Icra.

In the first five months of the current fiscal, cut and polished diamond exports witnessed a sharp year-on-year decline of 31% following lower export volumes and higher polished diamond prices, it said.

Export of cut and polished diamonds has been on a declining trend since the first half of 2022-23, it added.

“The export contraction is primarily being driven by weak underlying demand conditions in key consuming nations like the US and Europe due to the inflationary pressures, leading to a shift in spending away from diamonds,” Icra Vice President and Sector Head Sakshi Suneja said in a statement.

The demand from China, which accounts for 10-15% of the global demand, has also not picked up meaningfully so far, she said.

In addition, competition from lab-grown diamonds, which are priced at a significant discount to natural diamonds, also accentuated the dip in volumes, particularly for the large-sized diamonds in the range of one to three carats. The share of lab-grown diamonds within India’s total cut and polished diamonds exports continues to rise, she added.

Icra said prices of rough diamonds remain elevated in FY2024, with current prices hovering around the 15-year median level, despite some softening seen in recent months.

These prices had soared in the last two years, following limited supply from mining companies and robust revival in demand post the pandemic, it noted.

While some sequential improvement in volumes is expected in the coming months, driven by the onset of the festive season, overall exports are still expected to contract by 10 per cent year-on-year in the second half of the fiscal, the agency said.

The rating agency has thus revised the sector outlook to ‘negative’ from ‘stable’, it added.

A worker in one of the oldest and largest diamond polishing units of Surat checking its dazzle. File image for representation
| Photo Credit: Vijay Soneji

To harness the potential of Lab Grown Diamond (LGD) or synthetic diamond segment, the Union Budget 2023-24 presented by the Finance Minister Nirmala Sitharaman has laid emphasis on research & development as well as to make it competitive in the international markets.

“LGD is a technology-and innovation-driven emerging sector with high employment potential. These environment-friendly diamonds which have optically and chemically the same properties as natural diamonds. To encourage indigenous production of LGD seeds and machines and to reduce import dependency, a research and development grant will be provided to one of the IITs for five years,” the FM said in the Parliament.

Also Read: Key Highlights from Union Budget 2023-24

To reduce the cost of production, the FM has proposed to reduce basic customs duty on seeds used in their manufacturing. Also she has proposed to increase customs duties on silver dore, bars and articles to align them with that on gold and platinum.

Vipul Shah, Chairman, Gem & Jewellery Export Promotion Council (GJEPC) said the FM” decision to accept their recommendation pertaining to the LGD industry would ensure India’s end-to-end world leadership in rough to finished lab-grown diamond and jewellery manufacturing.

“Another positive pro-growth move is that the conversion of physical gold into digital gold will not attract capital gains tax,” he said.

Saiyam Mehra, Chairman, Gem & Jewellery Council (GJC), the domestic council of the industry said, “The Gems & Jewellery Industry’s critical concerns are not addressed in the Union Budget 2023-24. While the Research and Development grant will be provided to one of the IITs for the development of Lab Grown Diamond seeds and machines, the other sectors of the industry have been ignored.”

“The reduction in Gold Custom Duty in this Budget was our big expectation, which has severely hampered the industry and encouraged smuggling and grey market. GJC has been actively representing the reduction in customs duty of Gold over past many years. However, the Silver Dore Bars Custom Duty has been brought at par with Gold and platinum in this budget. This move will adversely affect the masses,” he said.

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