Gem and jewellery exports could drop to a 5-year low in FY24

In January 2024, gross gem and jewellery exports declined by only 5% from a year ago, totalling $2.39 billion. Shah said the recovery was attributed to increased demand during the holiday season in the USA.

” Going forward, we anticipate an uptick in demand from China, especially during its New Year celebrations in February. These factors are expected to maintain export momentum, leading to a positive outlook for the last quarter,” he pointed out.

In 2022-23, total gem and jewellery exports reached $37.74 billion, a drop of 4.6 percent from the previous year. Since 2018-19, when exports touched $39.72 billion, the exports have remained below $40 billion. During the Covid year of 2020-21, it plummeted to $25.51 billion.

The recovery is more in the case of gold jewellery exports, which have picked up well in the last couple of months. There was a marginal improvement in the export of gold jewellery till December of FY24, which improved further in January. In April-January, gold jewellery exports rose 15.69%, to $9.265 billion. “The Middle East market has been doing good in terms of plain gold jewellery exports,” Shah said.

Curiously, the import of cut and polished diamonds has gone up while that of rough diamonds has declined. But this does not indicate the diamond polishing work in India has slowed down, Shah clarified.

“India's diamond industry is multifaceted; many companies have diversified into vertically integrated operations, including manufacturing diamond studded jewellery for the global market. It's common for certain stones that are needed to finish jewellery pieces to be imported from other cutting centres. It doesn't imply a slowdown in diamond polishing in India,” he emphasised.

Indian cutters and polishers remain busy, especially as most lab grown diamonds (LGD) roughs are processed in India, which require the same skills as natural diamond cutting and polishing, he added.

Not just natural diamonds, but LGD, touted as the next big thing in the diamonds market, too has shown a slump in exports. LGD exports, though on a lower base, had grown over 150% in FY23. But LGDs faced a reversal this fiscal year, though it has started showing signs of a rebound in January, with over 10 percent growth. LGD exports plunged by 20.55 percent during April-January to $1.139 billion, from a year ago.

“The demand weakened and rates went down. But the market is stabilising and the next fiscal year LGD exports will improve. Poor demand, however, has affected the production in India, which is down by 20 to 25 percent,” said Milan Ashwin Shah, Director, Cupid Diamonds.

The initial LGD demand among consumers has worn off, at least among cost-conscious consumers, Shah felt. “However, LGDs and natural diamonds will co-exist. There will be a specific consumer base that will continue to embrace and purchase LGDs,” he said.

A growing number of customers are getting attracted to LGD, which has been an entry point for consumers aspiring to own a diamond. “The US, which controls around 60 percent of the export market, has already accepted LGDs and several major companies are planning to bring out LGD products. While it has garnered a significant share in the small diamonds category, around 30 to 40 percent of the big diamond jewellery market is getting into LGDs,” said Mahesh Mangukiya, Chairman, Kalista Jewels, and Core Committee Member, Surat Jewellery Manufacturers’ Association.

In India too, LGDs are finding increased acceptance. “There is a shift in demand towards LGDs across the country. Lots of companies are now focusing on them. We make an entire range of jewellery with LGDs going up to 100 carats,” said Smit Patel, Partner, Greenlab Diamonds.

LGDs, which share the same optical and chemical properties of natural diamonds, can be manufactured in laboratories and factories and are cheaper and more environment-friendly. In the 2023 union budget, the centre had removed 5 percent duty on import of LGD seed and provided a five-year grant to IIT (which) for research on the commodity.

“The government is providing a lot of incentives for LGD manufacture through bank loans, subsidies in power, technology, etc. This will boost LGD production in the country,” Mangukiya said.

Shah reckons that the year 2024-25 will see huge opportunities for expansion of the diamond sector in India and abroad. The government’s policy measures, such as a mega common facility centre in Santacruz Electronics Export Processing Zone (SEEPZ), and support for a research project of Rs 242 crore for lab-grown diamonds, will tremendously benefit the industry, he said.

Besides, he expects the India-Middle East-Europe economic corridor and proposed bilateral trade agreements with Europe to pave the way for penetrating newer markets and boosting trade volumes.

In the upcoming full budget in July, among the diamond industry’s expectations are the implementation of a safe harbour rule for the sale of rough diamonds in Special Notified Zones (SNZs), introduction of a Diamond Imprest Licence for the import of diamonds, and reduction in import duty on cut and polished diamonds to 2.5%.