India’s diamond industry in despair as exports hit two-decade low

India’s diamond industry is witnessing an unprecedented recession, with exports of cut and polished stones plunging at least 17 per cent in fiscal 2024-25.

The decline has triggered rampant job losses and worker suicides, besides a distress-driven reverse migration to the rural parts of Gujarat’s Saurashtra region.

The Indian diamond and jewellery sector, with its heartland in Surat, is the world’s largest cutting and polishing hub, accounting for around 80 per cent of the world’s total processed diamonds.

However, the sector has been struggling for years, resulting in the closure of about 50 per cent of small and medium diamond polishing and cutting units, spread across Mumbai and Surat, since 2020.

Falling exports

“The diamond sector has been facing a severe crisis for the past three years,” Shaunak Parikh, vice chairman of the Gems and Jewellery Export Promotion Council (GJEPC), told The Federal.

Exports of nearly all categories of gems and jewellery declined in FY25. The overall exports fell by almost 10 per cent. Exports of cut and polished diamonds crashed nearly 18 per cent, to Rs 1.12 trillion, the lowest in 20 years.

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“This is the third consecutive year that cut and polished diamond exports and overall jewellery exports have systematically declined,” Parikh said.

Trump tariff

According to him, the local industry was hopeful as exports seemed to rise 1 per cent in early March.

Further, US President Donald Trump initially planned to introduce a 27 per cent tariff on imported Indian goods from April 9. The American market rushed to place orders before the new tariffs kicked in.

But even as Indian exporters loaded up the orders, the implementation was postponed by three months.

The orders were then mostly cancelled or postponed, causing the share of unsold diamonds sent back to India to rise from 35 per cent last year to 45.6 per cent this year, added Parikh.

Lockdown and Ukraine

What first hit the diamond industry was the pandemic lockdown in 2020. When the markets opened post lockdown, demand from the US gave it a boost.

The industry had hardly recovered from its losses when the Western sanctions on Moscow kicked in following the Russia-Ukraine war.

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“Russian mines are a major source of rough diamonds for India. It was already impacted due to the war. Adding to that, the European Union and G7 banned imports of Russian diamonds via third countries,” explained Dinesh Nevadia, former president of the Surat Diamond Association (SDA).

“This further limited the access of India’s diamond industry to the raw material. By the time, the ban came into effect on March 2022, it cut off nearly a third of India’s diamond revenue,” Nevadia told The Federal.

“The diamond industry was hit by global recession in 2008 as well. But at that time, the demand for polished diamonds was still good. There was no impact on the supply of raw cuts. The situation now is precarious. We have not seen such a recession in our lives,” he added.

Lab-grown diamonds

Another factor for the slowdown in the sector is the advent of laboratory-grown diamonds.

Lab-grown diamonds are created using two methods — high-pressure and high-temperature (HPHT) or chemical vapor deposition (CVD), replicating the natural conditions under which diamonds form in coal mines.

“The demand of natural diamonds had gone down in China post pandemic, with fewer people able to afford pure diamonds. Meanwhile, China was extensively producing lab grown diamonds. Some traders of Surat who were reeling under huge losses decided to shift to lab-grown diamonds. By 2023, there were more than 10,000 traders in Surat and Mumbai and producing lab-grown diamonds,” Babu Vaghani, chairman of the Lab Grown Diamond Association (LGDA), told The Federal.

“The initial production cost of lab-grown diamonds was around $4,000 per stone. But within two years, it cut down to around $400-500 per stone with better machines that produce more finished products at a time. India’s lab-grown diamond industry has experienced substantial growth and now accounts for 15 per cent of global production. We are the second-largest producer after China,” Vaghani added.

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Real vs artificial

Even as the diamond industry has been struggling, lab-grown diamond sales have seen a meteoric rise, from less than 1 billion dollars in 2019 to 12 billion dollars in 2023.

However, the growth in the synthetic diamond sector has added to the slump in the diamond polishing and cutting industry.

“They sell for 10 per cent of the price of natural diamonds. Naturally, people prefer to buy synthetic diamonds. Besides, to the naked eye, there is no difference between synthetic and natural diamonds. Post pandemic, with the buying capacity going down, people are careful in investing in luxury products. Synthetic diamonds quickly stepped in,” said Nevadia.

Job loss and suicides

In November 2024, the diamond polishing and cutting units in Surat and Mumbai remained closed for about a month post Diwali due to economic reasons. This was the second consecutive year the sector extended its post Diwali vacation by almost a month.

“With the industry facing an unprecedented recession, diamond traders are resorting to all sorts of measures to cut losses. Usually the diamond polishing units are closed for around three weeks post Diwali. We pay bonus to our workers and then close for holiday,” said Jagdish Khunt, president of the SDA.

“But for the last two Diwali we have not had substantial sales. Last year, many factories had to let go their workers and shut down the unit for 36 days. It is the longest we have ever been closed apart from the lockdown. Even after opening, most units are operating at 50 or 60 per cent of the strength,” Khunt added.

“We decided to halt our operations for 10 days in August 2024. We opened for a week in September and then closed again for a month. We opened in October-end but with reduced working hours and reduced weekdays,” said Vallabh Lakhani, chairman of Kiran Gems, one of the largest diamond firms in Surat and Mumbai.

Rising joblessness

Since 2020, some 5,000 small and medium cutting and polishing units have shut down permanently, leaving around 2 lakh workers undeployed.

According to the Diamond Workers’ Union, Gujarat, over 65 diamond workers had committed suicide since the beginning of 2024.

According to Ramesh Zilriya, president of the union, every day, thousands of diamond cutters stand at the polishing hub of Varacha in Surat in the hope of being hired. But there is no guarantee of getting a job.

“Some people stand for days without being hired. Those hired are not better placed either. Since 2020, the salaries of workers have been cut by half. Before 2020, a cutting worker would earn Rs 350-550 a day depending on his experience; a polishing worker would be paid around Rs 700-850 a day. Now the average pay per day has come down to Rs 150-350 a day for both cutting and polishing,” Zilriya told The Federal.

“Since 2020, more than 200 workers have committed suicide. These workers migrant to Surat from various villages of draught-prone Saurashtra region. They come here in search of jobs after their crops fail so as to sustain their large families,” he said.

“Since the recession has hit the diamond industry, these workers had nowhere else to go. They did not get any government help either despite several representations,” he added.

Workers’ children quit schools

With the diamond workers losing jobs and facing salary cuts, there has been an increase in student drop out rates from government schools in Surat.

As per data of the Surat Municipal School Board, more than 900 students have quit school since November 2024.

“A total of 603 students dropped out between November and December 2024 primarily as their families were shifting back to their village in Saurashtra. Most were children of diamond workers. More students dropped out till March 2025 including students of class 10 and 12,” said Rajendra Kapadiya, chairman of the Municipal School Board in Surat.