As the pent-up demand from the pandemic years fades and discretionary spending decreases, small and medium enterprises (SMEs)—which generate about 70% of the industry’s revenue—are facing significant challenges. In the last financial year (FY24), exports of cut and polished diamonds, which account for about 60 per cent of India’s gems and jewellery exports, fell nearly a third year-on-year.

The US, the largest market for these diamonds, has seen a shift in spending patterns, contributing to the revenue slump for exporters in FY24. SMEs are particularly vulnerable to these fluctuations.

Meanwhile, international gold prices have been rising since October 2023 due to geopolitical tensions in West Asia and are expected to stay high in FY25 amid expectations of the US Federal Reserve cutting its policy rate. While higher gold prices can boost jewellery company revenues, a sharper-than-expected increase might dampen domestic demand, which typically peaks in the December quarter.

Performance across industry clusters will vary, with the Surat diamond processing hub expected to see a revenue contraction, while Domjur, Coimbatore, and Thrissur—specializing in gold jewellery for the domestic market—are likely to outperform export-oriented clusters.