The cut and polished diamond (CPD) exports from India are expected to hit a five-year low in FY24 with a dip of around 25-30% to $15- $16 billion compared, according to CareEdge Ratings, a knowledge-based analytical group, whose parent company is Care Ratings.
CareEdge Ratings expects the demand in the near term to remain subdued and no significant recovery in the segment during FY25.
As per the report, in the medium term, CPD exports from India will be influenced by economic recovery in consumption markets, geopolitical landscape, and customer preference for diamond jewellery in the discretionary spending space. The entities with prudent debtors and inventory management are expected to sail the tough tide.
Yogesh Shah, Senior Director at CareEdge Ratings says, “Players operating in smaller carat diamonds (below 0.3 carats) to be better placed than entities dealing in certified diamonds, as smaller carat diamonds have witnessed lower price erosion and limited impact of LGD diamonds”.
India is the world’s largest centre for cutting and polishing diamonds, accounting for over 90 to 95% of the total world’s polished diamond consumption. The US and China, the primary diamond-consuming markets, together account for approximately 65% of India’s diamond exports.
Following the pandemic, a surge in diamond jewellery demand, spurred by the US economic stimulus and limited opportunities for experiential spending, propelled CPD exports to record highs in FY22 ($24.43 bn) and FY23 ($22.04 bn). However, economic conditions in the US and China, the rise of alternative discretionary spending options, the growing market for Lab-grown Diamonds (LGD), and geopolitical tensions have negatively affected India’s CPD exports which resulted in a 28% year-on-year drop to $13.04 billion in the first ten months of FY24, driven by decreases in volume and value.
Furthermore, the impending impact of G7 sanctions on Russian-origin diamonds regarding logistic and operational challenges for Indian CPD players would remain a key monitorable, believes CareEdge Ratings.
Further, the demand-supply imbalance has pressured the pricing of polished diamonds, leading to a price correction estimated at 5%-10% for diamonds below 0.3 carats, 20%-30% for 0.3-3 carat diamonds, and 10%-20% for diamonds above 3 carats in CY23. This imbalance and price correction have adversely affected the export value.
Reacting to the report, Colin Shah, MD, Kama Jewelry said “We are in a wait-and-watch situation for the revival of diamond exports. The last one and a half years have been of constant economic turmoil for the Indian diamond industry. The major blow for the industry was owing to the constant ongoing geo-political crises starting from the Russia-Ukraine war to the Israel-Hamas conflict. The volatility is caused by the subdued sentiment in the major Indian diamond importing markets, the USA and China along with the growing preference for lab-grown diamonds in the international markets.
While the Indian diamond exports are yet to get ashore, we expect the tide to be in our favour in the long haul. The exports will start to see some relief by the end of CY2024 on the downward trajectory of the rates by the US Fed and reduced inflationary risks. While the market for lab-grown diamonds will co-exist with its natural counterpart, we expect to see some light at the end of the tunnel for corrections in natural diamond exports.”
