The Aryavarth Express
Agency(New Delhi): India’s diamond industry faces a challenging phase as cut and polished diamond (CPD) exports are anticipated to reach a five-year nadir in the fiscal year 2023-24. CareEdge Ratings forecasts a substantial decline of about 25-30% to USD 15-16 billion, underscoring a period of subdued demand with no immediate recovery expected in FY’25.
The downturn is primarily attributed to weakened economic conditions in the United States and China, which together constitute roughly 65% of India’s diamond export market. Factors such as alternative discretionary spending, the burgeoning market for lab-grown diamonds (LGD), and geopolitical tensions have notably dampened the prospects of India’s CPD exports.
The first ten months of FY’24 witnessed a 28% year-on-year decline in exports, totaling USD 13.04 billion. This decrease reflects a reduction in both the volume and value of diamond exports. The sector is also bracing for the impact of G7 sanctions on Russian-origin diamonds, which pose logistical and operational challenges for Indian diamond traders.
Looking ahead, the medium-term outlook for India’s CPD exports will hinge on the global economic recovery, geopolitical developments, and consumer preferences within the discretionary spending sector. CareEdge Ratings highlighted that entities dealing in smaller carat diamonds (below 0.3 carats) might fare better due to lesser price erosion and the limited impact of lab-grown diamonds on their market segment.
The preference shift towards lab-grown diamonds, especially in the bridal jewelry sector of the US, due to their cost-effectiveness, has contributed to the reduced demand for natural diamonds. Moreover, China’s ongoing economic woes, exacerbated by a real estate market collapse and shifting consumer preferences towards experience-based spending and gold jewelry, have further curtailed diamond demand.
To mitigate losses and prioritize inventory liquidation, Indian diamond entities voluntarily suspended rough diamond imports for two months (from October 15 to December 15, 2023), indicating strategic adjustments to navigate through the prevailing market conditions.
