Significant fall in prices, eroding consumer interest and competition with imports are some of the major challenges being faced by the domestic lab-grown diamond industry, think tank GTRI said on Sunday. It also said that while India faces the issue of production overcapacity, it continues to import lab-grown diamonds in large amounts and this issue needs deeper investigation.
To address these challenges, the government needs to take certain steps such as setting clear and consistent rules to standardize quality, certification, and market practices; issuing a Quality Control Order to check quality of imports; and investment in research and development to improve production processes, reduce costs, and enhance the quality of lab-grown diamonds.
The Global Trade Research Initiative (GTRI) said that India’s lab-grown diamond industry is facing a major challenge, with prices falling by 65 per cent in the past year, from Rs 60,000 to Rs 20,000 per carat due to local overproduction and oversupply from abroad.
This sharp decline points to problems like overproduction, high imports, and lack of regulation, which are hurting consumer confidence. Urgent corrective steps are needed to get this high-growth industry back on track, it added.
Meanwhile, natural diamonds cost around Rs 3.5 lakh per carat and this price drop is making it difficult for manufacturers to repay loans taken for purchasing lab-grown diamond making machines, putting them under financial strain, it said.
Lab-grown diamonds, as the name suggests, are created in laboratories replicating the natural high pressure, high temperature conditions under which diamonds are formed in the Earth’s mantle.
These diamonds are chemically, physically, and optically identical to natural diamonds. Natural diamonds come in various shapes, while lab-grown diamonds are usually square or rectangular. Lab-grown diamonds are produced in a rough form and need to be cut and polished, just like natural diamonds.
The value of a cut and polished lab-grown diamond is 6-8 times higher than its rough form.
“The industry faces several challenges, including falling prices, intensifying competition both from local and imports, and the lack of clear regulatory frameworks. These issues pose potential risks to the sustained growth and profitability of India’s lab-grown diamond sector,” GTRI Founder Ajay Srivastava said.
He said that the number of units producing lab-grown diamonds in India has increased to 10,000 units, leading to over supply and tougher competition.
He also said that it is easy to replace natural diamonds with lab-grown ones in jewellery with many small stones to save costs.
“The human eye can’t tell the difference; only an expensive machine (costing around Rs 15 lakh) can identify them. This leads to concerns where people wonder if the diamond necklace they bought is made of lab-grown diamonds while they paid for natural ones, creating trust issues,” Srivastava said.
The industry lacks clear regulations checking such practices, making it hard to ensure quality. Lack of proper certification, and low trust market operations could slow down the industry’s growth.
He added that 98 per cent of India’s imports of rough lab-grown diamonds come from Hong Kong (63.7 per cent or USD 728.2 million) and the UAE (28.5 per cent or USD 326 million).
In FY 2024, India imported rough lab-grown diamonds worth USD 1,143.7 million and exported cut and polished ones worth USD 1,304.6 million.
About 20 per cent of the imported rough diamonds were cut and polished for export, while the rest were used in the local market.
GTRI suggested that regulation and standardization will reduce uncertainty and ensure fairness in the industry.
Ministry of Consumer Affairs should create guidelines to clearly label and certify lab-grown diamonds in jewellery, and sales invoices should clearly state if the jewellery they sell include lab-grown diamonds, it said.
Key producers of lab-grown diamonds include China, the USA, and India. Globally, the lab-grown diamond market is expanding, especially in the USA, Europe, and Asia.
The global market was worth USD 26 billion in 2023 and is expected to reach USD 50 billion by 2030, with 40 million carats produced in FY24. This is still less than natural diamond production, which is around 110-120 million carats per year.
“The Indian lab-grown diamond industry is poised for significant growth, with the potential to become a global leader in the sector. However, addressing the challenges of overproduction, cutting imports, price volatility, financial strain, and regulatory ambiguities is crucial for the industry’s long-term sustainability,” Srivastava said.
People buy lab-grown diamonds instead of natural ones for several reasons such as lab-grown diamonds that look just like natural diamonds, with the same sparkle and strength. They are also much cheaper, often costing ten times less.
This substantial price difference makes lab-grown diamonds a more affordable option for consumers, even though they look and feel the same as natural diamonds.
