India’s Diamond Export Woes Deepen: Lab-Grown Competition and Trump Tariffs Push Sector to the Brink

India’s once-glittering Cut and Polished Diamond (CPD) industry is now grappling with an alarming downturn. According to the latest report by ICRA, the industry is expected to witness a further 7–10% decline in exports in FY2026, bringing total overseas sales down to just $12 billion, after hitting a 20-year low of $13 billion in FY2025. The continued Negative outlook on the CPD sector, as outlined in ICRA’s June 2025 report, signals persistent headwinds, ranging from shifting consumer preferences toward lab-grown diamonds (LGDs) to looming threats of US Trump tariff impositions.

The Rise of Lab-Grown Diamonds and Changing Consumer Sentiment

Once considered niche, lab-grown diamonds are now rewriting the rules of the luxury jewelry market. In FY2025 alone, LGDs claimed 8% of India’s polished diamond industry export share, up from a mere 1% in FY2019. Consumers, especially in developed markets, are increasingly favouring these synthetic alternatives because they are more affordable and perceived as ethically sourced.

Adding to the strain is the growing demand for fancy-coloured diamonds, which further reduces the market share of traditional CPD exporters.

Price Pressures Mount on Both Ends of the Pipeline

The pricing landscape offers little relief. Despite a notable 8% drop in rough diamond prices in FY2025—thanks to miner-led markdowns—polished diamond prices sank by 7% year-over-year, reaching record lows in the second half of FY2025.

The near-term forecast doesn’t suggest any significant recovery for the diamond industry. With mining companies expected to limit rough diamond production in FY2026, supply constraints are likely to stabilize rough prices at current levels, while polished prices remain range-bound due to weak global demand and tariff-related uncertainty.

Profit Margins and Credit Profiles Under Strain

Financial indicators paint a grim picture. The operating profit margins (OPM) of CPD companies sampled by ICRA dropped 400 basis points to 4% in FY2025. ICRA’s outlook for the diamond industry anticipates a further decline to around 3.6–3.7% in FY2026, citing the limited ability of firms to pass on additional costs stemming from anticipated US tariffs.

With earnings under pressure and working capital cycles stretched, the credit profiles of Indian CPD exporters remain subdued. Effective inventory management is expected to play a crucial role in navigating the challenging fiscal ahead.

A Sector at Crossroads

The report makes it clear: India’s CPD industry is in urgent need of strategic transformation. From adapting to the rise of lab-grown alternatives to mitigating risks from global trade politics with Trump Tariffs, the challenges are multifaceted. For a sector that contributes significantly to India’s exports and employment, the time for reactive measures is over—innovation and agility are now non-negotiable.