India's diamond exports have faced significant challenges lately, largely stemming from subdued demand in key markets like China, which shows little sign of recovery post-Covid-19. According to Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council (GJEPC), India's dominance in global diamond polishing, responsible for nine out of every ten polished diamonds worldwide, has not shielded it from these impacts.

"Currently, we are grappling with weak demand, exacerbated by China's slow economic rebound," Shah explained to Reuters, highlighting China's substantial role, accounting for about a third of India's cut and polished diamond exports, mainly facilitated through Hong Kong. Factors such as economic slowdown, shifting consumer preferences towards gold jewellery over diamonds, and fewer weddings have further dampened diamond demand in China.

The repercussions are stark: India's cut and polished diamond exports plummeted nearly 15% in the June quarter compared to the previous year, following a troubling 27.5% decline in the 2023/24 fiscal year ending March 31. Shah emphasized the urgent need for government intervention to stabilize the industry amidst these challenging conditions.

Last month, industry leaders urged the Indian government to include specific concessions in the upcoming budget to support the sector through its current turbulence. Among their requests, Shah mentioned the GJEPC's plea for allowing the sale of rough diamonds in Special Notified Zones (SNZs) and granting operational licenses to globally renowned diamond trading firms like Bonas and I Hennig within SNZs. Unlike counterparts in Belgium and Dubai, Indian firms face tax barriers that prevent them from procuring rough diamonds from SNZs.

Shah further highlighted that Indian diamond units have scaled back imports of rough diamonds due to both subdued demand for polished diamonds and shrinking profit margins amid declining polished diamond prices. India's gems and jewellery industry, a significant employer with over 4.3 million jobs, constitutes more than 10% of the country's goods exports, underscoring its critical economic importance.

As the industry navigates these challenges, concerted government support could prove pivotal in safeguarding its global leadership and sustaining its substantial contribution to India's export economy.