Will India's diamond hub sparkle this Diwali? Surat traders hope for festive cheer

The diamond industry is mainly export-driven.

Of late, the sheen has worn off Surat’s diamond industry, a significant contributor to the country's gems and jewellery exports. The world's hub of diamond polishing, it has recently been marked by massive layoffs and factory shutdowns caused by a host of factors, and the industry hopes the holiday period boosts demand after months of global disruptions. Apart from the festival season in India, the segment is also pinning its hopes on a revival in demand from buyers in the US and China.

According to data from Global Trade Research Initiative (GTRI), thousands of workers have been laid off, with approximately 800,000 diamond workers concentrated in Surat.

Specifically, India's gems and jewellery sector contributes 10-12 percent to the country's total merchandise exports, with diamonds being the largest component. The industry is mainly export-driven, and nearly 90 percent of the world's diamonds are processed in India, with Surat as a key centre.

The industry’s challenges stem from a combination of Western sanctions on Russian diamonds amid the Russia-Ukraine conflict and reduced demand from key markets such as the US and China. According to Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council (GJEPC), the job losses and closures were inevitable, with rough diamond supply from Russia—once a major source for Surat—essentially cut off. Additionally, both American and Chinese consumer markets saw a downturn, leading to a cascade effect in Surat.

"The Surat diamond industry crisis happened because of disruptions in supply and demand. China is a major consumer of diamonds, but there is a slowdown in their market, and the same in the US," Shah told Moneycontrol. "Diamond mining companies have been controlling supply recently, which has stopped the sharp price corrections we saw earlier. Now, with production under control, stability has returned to the business."

While the US and Chinese markets remain critical, Shah foresees a gradual resurgence. A robust retail sector in India, with 3,000 new jewellery stores, and expected demand from the US Christmas season could prove crucial to stabilising Surat’s diamond trade. “Things should start picking up in a couple of months. In India, there is a retail boom, and the Christmas season looks promising for US demand for natural diamonds. Q4, after the Chinese New Year, should bring a pickup in natural diamond demand from China,” Shah added.

Impact of job cuts and factory closures

The crisis led to 30-35 percent at diamond cutting and polishing units having been let go, with Shah’s own factories in Surat and Bhavnagar forced to cut jobs. “Around 800 people are currently employed in my factories. We had to make the tough decision of laying off 30-35 percent of our workforce,” Shah explained.

Kamal Singhania, director of the All India Gem and Jewellery Domestic Council (GJC), emphasised that the slowdown in demand from the US is likely temporary. “After the US elections, we may see a recovery in demand. Imports of Russian diamonds were impacted due to geopolitical tensions and sanctions on Russia,” Singhania noted.

Competition from lab-grown diamonds

Adding to the Surat industry’s challenges, lab-grown diamonds have made deep inroads into the market, driven by lower costs and lack of production controls. Shah noted that the cost advantage offered by lab-grown diamonds has attracted new buyers, although he sees lab-grown diamonds as an emerging category rather than a direct replacement.

“Lab-grown diamonds have taken some market share from natural diamonds, leading to a drop in diamond prices. However, lab-grown diamonds cater to a different customer base, those who could not afford diamonds before," said Shah.

Singhania agreed, explaining that the price advantage has driven some shift in consumer preference, although the natural diamond market is likely to rebound as demand stabilises.

With upcoming holidays across major economies, Surat’s diamond industry cautiously anticipates renewed demand. Stability in production, along with an anticipated revival in consumer markets, signals hope for an industry hit hard by geopolitics and competitive pressures.