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Informist, Monday, Sept. 22, 2025

 

MUMBAI – CareEdge Ratings continues to maintain a negative outlook on Indian cut and polished diamond exports and expects a further 17-20%  decline in exports to $11 billion in the financial year 2025-26 (Apr-Mar), it said in a report Monday. India's significant share in diamond processing, which is 90% by volume of polished diamonds, limits options for buyers in the near term. If the 50% tariff imposed on Indian goods exports to the US is passed on fully, it will increase the price for the end consumer in the US significantly, which is likely to adversely affect demand for cut and polished diamonds, the rating agency said.

 

The cut and polished diamond industry has been experiencing a rough phase in the past two years due to global headwinds, as exports have declined by 17.5% on year to $13.3 billion in FY25. The sector now braces itself against the steep export tariffs to the US, a key diamond-consuming nation. "The CPD (cut and polished diamond) industry operates in single-digit profit margins, and the imposition of blanket tariffs as high as 50% has exacerbated pressures across the value chain, deepening concerns around revenue, profitability, liquidity, and operational resilience," the agency said.

 

Indian cut and polished diamond players are responding to the tariffs by curtailing production and exploring new geographies with key focus on European and domestic market exposure. The sector is also seeking the support of the government through incentive schemes and may consider relocating processing units to lower-tariff jurisdictions in the medium term, if the current trade environment continues, CareEdge Ratings said.

 

"Tariffs increasing to 50% by key diamond-consuming nation is expected to exacerbate the demand sluggishness in the CPD (cut and polished diamond) industry. The industry continues to face competition from LGDs (lab-grown diamonds), and there is limited offsetting potential from alternative markets, such as India and China," Akhil Goyal, director, CareEdge Ratings said.

 

India has emerged as the world's second largest diamond jewellery market. The rise in demand in 2024, which is expected to continue into 2025, is supported by increasing disposable income, higher penetration, increasing acceptance of diamond jewellery in Tier-2 and Tier-3 cities, and greater financial independence among women. Lab-grown diamonds are also gaining traction in the country due to their affordability.

 

"As a result, India's domestic demand--while resilient--is unlikely to offset the sharp decline in exports to the US and China," it said. India's polished diamond industry, which earns 80% of its revenue from exports, relies heavily on the US, which accounts for over 40% of the global polished diamond demand. Although shipments may be routed through global trading hubs, India's direct exports to the US accounted for 37% of the country's cut and polished diamond exports in FY25.

 

CareEdge Ratings rates a portfolio of entities in the gems and jewellery industry, out of which cut and polished diamond and lab-grown diamond entities account for a combined income of around INR 480 billion. The total debt rated across these entities is INR 119 billion. "In the last two years, Indian diamantaires have focused on reducing debt levels through inventory, while build-up of net worth base resulted in low leverage at below unity levels for the rated portfolio. Industry has also witnessed some consolidation with smaller players moving out due to low profitability and price erosion," Ujjwal Patel, director, CareEdge Ratings, said.

 

"Low leverage with debt majority in form of working capital provides support to financial risk profile of players in near term and reduces default risk," Patel continued. "High US tariff is expected to impact scale and weaken profitability and credit metrics. However, the ability to maintain lean inventory levels and low leverage profile will continue to remain a key monitorable (parameter)."  End

 

US$1 = INR 88.30

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Ashutosh Pati

Edited by Rajeev Pai

 

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