Expected decline in the diamond industry, impacting US tariffs and the LGD challenge

The Indian diamond trade can be squeezed twice because of diminishing demand worldwide, growing competition from lab-grown diamonds (LGDs), and US duties. This was given in a recent report prepared by credit ratings company ICRA. The report states that cut and polished diamond (CPD) exports will slow down between 7% and 10% in FY 2026. That decline was 17% in FY 2025. There has been no hope for this sector since then.

ICRA's report said CPD exports fell to a 20-year low of $13.3 billion in FY25, impacted by the global macroeconomic slowdown and growing consumer preference for cheaper LGDs. These now account for 8% of polished diamond exports, up from just 1% in FY19.

In addition, the recent imposition of a 27 per cent tariff by the US is likely to hurt India. The US is a major market, accounting for more than a third of India's CPD exports. Though this has currently been capped by a 10 per cent interim tariff, exporters are still concerned. Many Indian companies are now rerouting shipments through low-tariff hubs such as Dubai and Belgium to mitigate the impact.

The report said operating profit margins for CPD firms have fallen by 400 basis points to around 4 per cent in FY25. ICRA has projected a further decline of 3.6 to 3.7% in FY 2026.

Meanwhile, the price of raw diamonds has fallen sharply by 8% and the price of polished diamonds by 7% in FY 2025. At the same time, the prices of raw diamonds are expected to remain in a limited range due to the reduction in production by miners like De Beers. ICRA believes that the credit profile of the diamond industry may remain weak in the near future.