India’s Diamond Trade: A Critical Slowdown and Its Wider Impact
India’s polished-diamond exports have fallen to ₹1.10 lakh crore—their lowest in two decades. This decline not only impacts Surat, the global hub of diamond polishing, but also carries significant consequences for India’s broader trade and employment landscape. Gems and jewellery still account for around 7% of India’s merchandise exports, with diamonds contributing nearly half of that value. When diamond earnings fall, India’s trade balance, foreign exchange reserves, and millions of livelihoods are affected.
The Journey of a Diamond to Surat
Diamonds begin their journey deep underground and are brought to the surface through volcanic eruptions. Rough diamonds are mined in countries like Botswana, Russia, and Canada, and then traded in global centres such as Antwerp and Dubai.
Almost every rough diamond ultimately arrives in Surat, Gujarat, where over 5,000 polishing units employ 8–10 lakh workers. Surat transforms these stones into polished gems more efficiently and cost-effectively than any other place in the world. An estimated 80-90% of the world’s polished diamonds pass through Surat, fueling not just the city’s economy but also supporting various allied industries.
From Boom to Bust: A Rapid Decline
In 2021-22, the diamond trade saw record highs with India exporting polished stones worth ₹2.92 lakh crore (approximately US$40 billion). The traditional financial model was straightforward:
• Purchase rough diamonds worth ₹90,000 crore,
• Polish them,
• Sell finished stones for around ₹1.5 lakh crore,
• Retain the ₹60,000 crore margin for operational costs and profits.
However, by last year, this margin shrank dramatically to ₹21,000 crore. The causes:
• Falling prices: RapNet, a key pricing index, showed a 20% decline in 2023 and another 14% in 2024.
• Reduced demand: Both rough and finished stone prices fell, but not enough to preserve profit margins.
This led to:
• The shutdown of about 2,000 small polishing factories, roughly 40% of the cluster.
• Halved working hours and steep wage cuts—from ₹40,000–₹50,000 to ₹15,000–₹18,000 a month.
• An alarming rise in worker distress, linked to around 70 suicides over 17 months.
Four Major Shocks Behind the Slowdown
1. Sanctions Against Russian Diamonds
The G7 imposed phased bans on Russian-origin diamonds in 2024. As 70% of global diamond jewellery buyers are from the U.S. and Europe, Surat’s dependence on Russian roughs became a liability. Diamonds must now pass strict origin-verification checks in Antwerp, choking supply chains and reducing demand for Russian stones.
2. Weak Demand in the U.S. and China
High inflation in America curbed luxury spending, while China’s property crisis shifted consumer preference from diamonds to gold. Furthermore, lab-grown diamonds (LGDs)—costing 60–80% less—are increasingly popular for engagement rings. Although Surat polishes LGDs as well, the ₹10,700 crore earned from LGD exports last year only partly compensates for losses in natural diamonds.
3. U.S. Tariff Threats
In March 2025, Washington proposed a 27% tariff on Indian diamonds. Although the tax was paused for 90 days, the initial warning disrupted the market. A temporary export spike in March was followed by a sharp decline in April, leaving factories struggling with inventory and no new orders.
4. Inventory Build-up and Tightened Bank Lending
Polished diamonds are piling up. The inventory gap widened significantly from $1.6 billion in FY22 to $4.4 billion in FY24. With rising defaults and valuation risks, banks have tightened lending norms, making it harder for diamond traders to finance operations by pledging inventory as collateral.
Broader Implications
Employment and Local Economies
The diamond industry directly employs about 10 lakh individuals and supports 20 lakh more through ancillary services. Factory shutdowns and wage cuts ripple through the wider economy, affecting everything from transport to food vendors and housing.
Pressure on India’s Forex Reserves
India’s gems-and-jewellery exports dropped to ₹2.37 lakh crore last year from nearly ₹3 lakh crore two years ago. The shrinking forex inflow from diamonds widens India’s current account deficit, weakening the rupee and increasing vulnerability to global oil and electronics price spikes.
Conclusion
The slowdown in India’s diamond trade is not just a sectoral crisis—it is a national economic challenge. Surat’s struggles are a reminder that global shifts, from sanctions to synthetic alternatives, require adaptation and resilience across India’s key export industries. Supportive policy measures and diversification strategies will be essential to revive this critical sector and protect the livelihoods it sustains.