India’s cut and polished diamond exports to hit decade low in 2025

India’s Cut and Polished Diamond (CPD) exports are projected to decline to a decade-low level of $12.5-13.0 billion in FY2025, marking a YoY contraction of 18-19%, according to a recent note by ICRA. This decline is expected to be driven by a 13-14% reduction in export volumes, coupled with a softening of average realizations by 5-6%. ICRA’s analysis indicates that the contraction in CPD exports continues to reflect the challenges faced by the industry, which witnessed a 28% drop in exports in FY2024. The decline was largely attributed to global macroeconomic conditions and increasing competition from lab-grown diamonds (LGDs).

One of the primary factors driving this downturn is the subdued demand in the two largest markets for CPD— the US and China. Inflationary pressures in the US have dampened consumer spending on luxury items such as diamonds, while in China, shifting consumer preferences have reduced demand for traditional diamonds. As a result, India’s CPD exports in the first four months of FY2025 have contracted by 19% year-on-year.

Although some improvement in volumes is expected in the months ahead due to the festive season, it is unlikely to significantly lift overall export figures. The current high inventory levels and ongoing pressure on polished diamond prices will likely offset the volume gains. Since April 2022, polished prices have been on a declining trajectory due to weak demand, hitting a record low in August 2024. The decline in prices is expected to persist in the second half of FY2025, as diamond players attempt to offload their high inventory.

ICRA has maintained a negative outlook for the CPD sector, reflecting the challenges the industry faces. Despite the approaching festive season, which usually boosts demand, the combination of high inventory levels and weakening prices suggests a tough road ahead for CPD exporters.

The increasing competition from lab-grown diamonds is another factor that cannot be ignored. Lab-grown diamonds offer a more affordable alternative, attracting a growing share of the global market, particularly among price-sensitive consumers, further pressuring traditional diamond exports from India.