According to CareEdge Ratings, 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 billion to $16 billion and expects the demand in the near term to remain subdued. CareEdge Ratings expects no significant recovery in the segment during FY25.
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 had resulted in a 28% year-on-year drop to $13.04 billion in 10MFY24, 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.
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”.
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.
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