The exports of cut and polished diamonds from India are expected to hit a five-year low in this fiscal, experiencing a dip of about 25-30 per cent to $16 billion as demand in the near term remains subdued.

India is the world’s largest centre for cutting and polishing diamonds, accounting for over 90 to 95 per cent of the total global consumption of polished diamonds. The US and China, the primary markets for diamond consumption, together account for approximately 65 per cent of diamond exports.

Given the slowing economic growth in the US and China, along with intense competition from lab-grown diamonds, CareEdge Ratings expects no significant recovery in the segment during FY25.

Additionally, the rise of alternative discretionary spending options and geopolitical tensions has negatively impacted CPD exports, leading to a 28 per cent year-on-year drop to $13.04 billion in the first 10 months of this fiscal.

The impending impact of G7 sanctions on Russian-origin diamonds, regarding logistic and operational challenges for Indian CPD players, would remain a key monitorable, said CareEdge Ratings.

In the medium term, it said that CPD exports will be influenced by economic recovery in consumption markets, geopolitical landscape, and customer preference for diamond jewellery. The entities with prudent debtors and inventory management are expected to sail the tough tide.

Yogesh Shah, Senior Director, CareEdge Ratings, said that players operating in smaller carat diamonds (below 0.3 carats) to be better placed as they have witnessed lower price erosion and limited impact of LGD diamonds.

Furthermore, the demand-supply imbalance has exerted pressure on the pricing of polished diamonds, resulting in a 5-10 per cent price decline for diamonds below 0.3 carats, a 20-30 per cent drop for 0.3-3 carat diamonds, and a 10-20 per cent decrease for diamonds above 3 carats last year. This imbalance and price correction have adversely affected the export value.

Colin Shah, Managing Director, Kama Jewelry, said the last one and a half year has been a period of constant economic turmoil for the diamonds industry amid constant ongoing geopolitical crises, ranging from Russia-Ukraine war to Israel-Hamas conflict.

The exports will start to see some relief by the end of this year on possible US Fed rate cut and lower inflationary risks. While the market for lab-grown diamonds and natural diamonds will co-exist, there is definitely some light at the end of the tunnel for natural diamond exports, he added.