India’s cut and polished diamond exports set to fall 17-20% in FY26 amid US tariffs: CareEdge
According to CareEdge, India accounts for more than 90% of the world’s polished diamonds by volume. The recent US tariffs of up to 50% risk increasing prices for the end consumer and dampening demand in a key market, which alone accounts for more than 40% of global polished diamond consumption.
New Delhi: The cut and polished diamonds (CPDs) sector, once a bright spot in India’s export basket, is now under pressure with CareEdge Ratings projecting a 17-20% decline in exports to around $11 billion in FY26. The industry, which saw a 17.5% drop in exports to $13.3 billion in FY25, faces multiple headwinds including weak global demand, high US tariffs, and increasing competition from lab-grown diamonds (LGDs).
According to CareEdge, India accounts for more than 90% of the world’s polished diamonds by volume, leaving buyers with few alternatives. The recent US tariffs of up to 50% risk increasing prices for the end consumer and dampening demand in a key market, which alone accounts for more than 40% of global polished diamond consumption.
“Tariffs increasing to 50% in key diamond-consuming nations are expected to exacerbate demand sluggishness," said Akhil Goyal, director, CareEdge Ratings. “Competition from LGDs, coupled with limited offsetting potential from markets like India and China, keeps the outlook negative."
Vipul Shah, managing director & CEO of Asian Star Company, a diamond and jewellery manufacturer and exporter, said, “The 50% tariff imposed by the US makes Indian jewellery far less competitive for American buyers. This could result in demand contraction, order cancellations, and potential job losses across cutting and polishing units. In light of this, the sector will likely intensify its call for GST relief and policy support to remain viable in global markets."
Export-led sector
The report highlighted that while India has emerged as the world’s second-largest diamond jewellery market, accounting for about 10% of global demand, domestic growth is unlikely to fully offset falling exports. Rising gold prices and the increasing adoption of LGDs are expected to keep local consumption growth moderate.
The sector relies heavily on exports, with around 80% of revenue coming from overseas shipments and the US alone representing nearly 37% of India’s CPD exports in FY25.
In FY18, India’s gems and jewellery exports stood at $41.54 billion, accounting for about 13.8% of the country’s total goods exports of $300.67 billion. But by FY25, the sector’s exports had fallen to $29.80 billion, representing just 6.9% of total goods exports of $433.56 billion. Of the $29.80 billion of exports, $9.94 billion (about 33%) were to the US – marginally up from $9.91 billion in FY24.
In response to the tariff, Indian diamantaires have adopted cautious strategies, maintaining lean inventory levels, optimising costs, and reducing reliance on borrowings. Upstream, miners have curtailed production and deferred supply to avoid oversupply, while midstream players are increasingly relying on owned sources to protect liquidity.
New vistas
In its report, CareEdge noted that some players were exploring new markets, particularly in Europe and domestically, while also lobbying for government support and incentives. Some are also considering relocating their processing units to lower-tariff jurisdictions if the current trade environment persists.
Mint reported on 16 September that to mitigate the impact of high tariffs imposed by the US, several Indian companies in the gems & jewellery, specialty chemicals and textile sectors were turning their gaze overseas, looking to set up manufacturing, repackaging or bottling units, or explore joint ventures. Companies were also looking at stepping up exports to other places such as Vietnam, the UK and the Middle East to reduce their dependence on the US, India's largest export partner, the report said. India shipped $86.5 billion worth of goods to the US in 2024-25, or 20% of its total merchandise exports of $433.56 billion.
On the credit front, CareEdge rated CPD and LGD entities with a combined income of around ₹48,000 crore and total debt of ₹11,900 crore. Around 85% of these entities were investment-grade, supported by low leverage (0.4 to 0.6 debt-to-equity ratio) and healthy interest coverage ratios of 3 to 3.5.
Ujjwal Patel, director at CareEdge Ratings, said, “Low leverage and controlled inventory levels provide a cushion to financial risk even in stressed conditions. However, high US tariffs are likely to put pressure on scale, margins, and credit metrics."
Minor relief
Meanwhile, the government has raised duty drawback rates on certain jewellery and precious metals to provide relief to exporters. According to a notification issued by the department of revenue on 25 August:
- the duty drawback rate on silver jewellery and articles of silver has been increased from ₹335.50 to ₹466.76 per 10 grams;
- the rate on gold jewellery and articles of gold has been raised from ₹4,468.10 to ₹5,234.00 per 10 grams;
- the relief on platinum jewellery and articles of platinum has been revised upwards from ₹4,468.10 to ₹5,234.00 per 10 grams.
A duty drawback scheme is a programme that refunds or remits duties, taxes, or fees paid on imported goods when those goods or products made from them are subsequently exported. It essentially allows exporters to recover a portion of their costs on raw materials or components, making their final products more competitive in the global market.
The US imposed 50% tariffs on Indian goods effective 27 August. The steep tariffs are set to hit labour-intensive sectors such as textiles, leather, agricultural products, and gems and jewellery the hardest.
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