Diamond exports from India fell by 28% in FY2024, driven by worsening global economic conditions and rising competition from lab-grown diamonds (LGD). The country’s exports of cut and polished diamonds (CPD) are expected to drop to a decade-low of $12.5-13.0 billion in FY2025, reflecting an 18-19% year-on-year decline. This contraction is due to a 13-14% fall in volumes and a 5-6% drop in average prices.
The downturn in diamond exports is attributed to weak demand in key markets like the U.S., affected by inflation, and China, where consumer preferences are shifting away from diamonds. As of the first four months of FY2025, exports have already seen a 19% decline year-on-year. Although some improvement is expected during the festive season, it will be offset by high inventory levels and continued pressure on polished diamond prices.
Sakshi Suneja, Vice President & Sector Head of Corporate Ratings at ICRA, noted that U.S. and China demand has been sluggish due to economic uncertainty and inflation, with China’s renewed interest in gold further impacting diamond sales. Additionally, geopolitical tensions, including G7 sanctions on Russian diamonds, have hurt European demand. Lab-grown diamonds, being significantly cheaper than natural ones, have also reduced demand for large diamonds (one to three carats).
Despite these challenges, India remains a key market for diamond-studded jewelry. However, polished diamond prices, which have been dropping since April 2022, hit an all-time low in August 2024. This price pressure is expected to persist through the second half of FY2025, despite the festive season, as diamantaires work to offload high inventories. While rough diamond prices saw recent corrections, they are expected to stabilize as miners cut production to match demand. Increased sanctions on Russia’s Alrosa PJSC, one of the largest rough diamond suppliers, will likely prevent further price declines.
The narrowing gap between rough and polished prices, combined with reduced operations, will likely reduce the operating profit margins (OPM) of Indian diamantaires by 60-70 basis points in FY2025. The credit profiles of Indian diamond companies weakened in FY2024 due to longer working capital cycles, high inventory levels, and rising global lending rates. In FY2025, profitability and operational scale will continue to suffer, but companies managing their inventory and reducing dependence on external debt may fare better financially.
