India's diamond exports likely to hit 5-yr low in FY'24 to $15-16 bn: Report

Diamond export: India's cut and polished diamond (CPD) sector is bracing for a significant downturn in the fiscal year 2023-24, with exports projected to hit a five-year low at around $15-16 billion – marking a staggering 25-30 per cent dip, according to insights from CareEdge Ratings. The key culprits behind this somber outlook are the economic woes in major diamond markets, namely the US and China, coupled with a surge in alternative spending options, the burgeoning market for lab-grown diamonds (LGD), and geopolitical tensions.

The US and China, together constituting a substantial 65 per cent share of India's diamond exports, are grappling with economic challenges and a shifting consumer landscape that favors experiences over traditional luxury purchases. In the first ten months of the fiscal year (April-January), CPD exports saw a sharp 28 per cent year-on-year contraction, plummeting to USD 13.04 billion due to dwindling volume and value.

Adding to the industry's woes, the imminent impact of G7 sanctions on Russian-origin diamonds looms large, potentially creating logistical and operational hurdles for Indian CPD players. Looking forward, CareEdge Ratings points to a medium-term outlook shaped by factors like economic recovery in consumer markets, geopolitical dynamics, and evolving customer preferences in the discretionary spending space.

Interestingly, the rating agency suggests that players specializing in smaller carat diamonds (below 0.3 carats) are better positioned than their counterparts dealing in certified diamonds, given the lower price erosion and a more limited impact from the growing trend of lab-grown diamonds. The price correction in smaller diamonds, up to 0.3 carats, reported a milder 5-10 per cent compared to the steeper 10-30 per cent correction in higher carat diamonds.

Stateside, the US diamond and jewelry industry is grappling with challenges, including rising inflation and a discernible shift towards experience-based spending, dampening consumer sentiment. Further compounding the situation is the rising preference for lab-grown diamonds in bridal jewelry due to pricing considerations, resulting in reduced demand in the largest diamond market globally.

Across the Pacific, China, the second-largest market, has been mired in an economic crisis since 2018, marked by a real estate market collapse and a preference for experience-based spending and gold jewelry, all contributing to a subdued demand for diamonds.

In a bid to navigate the challenging landscape and focus on inventory management, Indian entities took a proactive step, opting for a self-imposed suspension of rough diamond imports for a two-month period spanning from October 15 to December 15, 2023. This move underscores the industry's commitment to weathering the storm and adapting to the evolving market dynamics.

With PTI Inputs