India’s natural diamond polishing industry is staring at its steepest revenue fall in nearly two decades, with earnings expected to drop 28-30% to about $12.5 billion this fiscal from $16 billion last year, according to Crisil Ratings.
The decline follows the US decision to impose 50% tariffs (25% reciprocal plus 25% penalty) on polished diamond imports, effective this week. Already grappling with a 40% fall over the past three years due to weak demand in the US and China and competition from lab-grown diamonds, the industry now faces its lowest revenues since 2007.
Margins are set to come under pressure as exporters struggle to absorb the levy or pass it on to consumers amid subdued demand. Crisil estimates operating margins could shrink to 3.5-4%, down from a peak of 5.5% in FY23.
“The upshot is that revenues for the domestic industry, which polishes ~95% of all diamonds produced globally, is set to drop sharply. While India’s consumption is rising and the UAE has doubled its share of India’s exports, these gains cannot offset the US and China slump,” said Rahul Guha, Senior Director, Crisil Ratings