The Challenges of India's Diamond Industry Amid Global Challenges

India's diamond industry, centered in Surat, faces challenges from U.S. tariffs, global disruptions, and the rise of lab-grown diamonds. Once a global leader, exporting $13.2 billion in 2024-25, the sector struggles with a 52.1% tariff on U.S. imports, pandemic impacts, and reduced demand. Employment for over 2 million workers has been hit hard. However, growth in India's domestic jewelry market and diversification into new regions like Latin America offer hope. Adapting to shifting trends is critical for recovery.

India's diamond industry, a cornerstone of the global gem trade, is facing unprecedented challenges. Surat, often referred to as the "Diamond City of India," is home to thousands of small factories where millions of workers transform rough diamonds into exquisite polished gems. However, a mix of international trade policies, shifting consumer preferences, and global disruptions has left the industry grappling for stability.

A Global Leader Under Pressure

Surat's diamond sector is integral to the global market, cutting and polishing 14 out of every 15 natural diamonds worldwide. Yet, the industry is now contending with U.S. tariffs that could disrupt its dominance. In the 2024-25 financial year, India exported $13.2 billion worth of cut and polished diamonds, with $4.8 billion going to the United States — over one-third of the total export value. However, ongoing trade tensions have strained this vital relationship.

In August 2025, U.S. President Donald Trump imposed a steep 50% tariff on diamond imports from India, citing geopolitical concerns over India’s continued purchase of Russian oil. This move followed an earlier reciprocal 25% tariff on Indian goods. Combined with an existing 2.1% tariff, India's diamond exports to the U.S. now face a staggering 52.1% tariff, making it difficult for American buyers to justify their purchases.

A Crisis Decades in the Making

The U.S. tariffs are just the latest in a series of blows to India's diamond industry. The COVID-19 pandemic triggered a global economic slowdown, severely affecting key markets like Hong Kong and China. The Russia-Ukraine conflict further disrupted the supply chain, with Western sanctions on Russian rough diamonds cutting off a historically significant source.

Adding to these pressures is the rise of lab-grown diamonds. Manufactured in specialized laboratories, lab-grown gems are nearly indistinguishable from their natural counterparts but cost a fraction of the price. This affordability has attracted cost-conscious consumers, gradually eating into the market share of natural diamonds.

Declining Trade and Employment Woes

The financial toll is evident in the trade statistics. India imported $10.8 billion worth of rough diamonds in 2024-25, a 24.27% drop from the previous year. Similarly, exports of cut and polished diamonds fell by 16.75%, from $16 billion in 2023-24 to $13.2 billion in 2024-25. This decline has ripple effects on employment, with over 2 million workers in Surat, Ahmedabad, and Rajkot bearing the brunt of salary cuts and job losses.

Finding a Path Forward

Despite these challenges, industry leaders see potential for recovery. Increasing domestic demand for diamonds and exploring new export markets, such as Latin America and the Middle East, are vital strategies. India's domestic gems and jewelry market, currently valued at $85 billion, is projected to grow to $130 billion within two years, offering a glimmer of hope.

To remain competitive, the industry must adapt to shifting consumer preferences and global trade dynamics. Diversification, innovation, and strategic partnerships will be key to ensuring that India retains its position as a global leader in the diamond trade.

The road ahead for India's diamond industry is fraught with challenges, but it is not without opportunities. By leveraging its expertise and embracing change, Surat and its diamond workers can weather this storm and continue to shine on the global stage.