New Delhi: Revenues of Indian diamond polishers are expected to drop by 30 – 35 per cent year-on-year to USD 14-15 billion, said a recent report by Crisil Ratings.
The slump in revenues is projected owing to the economic slowdown as key markets including the US, the European Union (EU), and China have cut their demand. As per Crisil‘s findings, these three geographies account for about 75 per cent of India’s polished diamond exports.
“High inventory of polished diamonds amid falling retail prices will put the profitability of polishers under the pump,” said the report.
The demand for polished diamonds had started weakening since last fiscal amid slowing economic activity leading to a volumetric drop of 25 per cent. However, as per the report, the 10 per cent rise in the prices of polished diamonds last fiscal helped arrest the decline in India’s polished diamonds exports to USD 22 billion last fiscal against USD 24.2 billion in fiscal 2022.
In addition to a fall in demand in major markets, the prices of rough diamonds have corrected woing to ample supply, resulting in polished diamonds getting cheaper by 10-15 per cent.
With a high inventory of polished diamonds piling up amid falling prices, the profitability of polishers will be affected by 50-100 basis points, the report estimated.
Further, the demand for lab-grown diamonds (LGDs) has been growing strong with their market share doubling to 15 per cent YoY. It is noteworthy that LGDs are 20-40 per cent cheaper than natural diamonds and have quite similar characteristics.
Highlighting the impact of the Israel – Hamas war, Rahul Guha, director, CRISIL Ratings, said, “Israel imports ~$1.25 billion worth of polished diamonds annually from India. With the country now declaring a war on the Palestinian militant group Hamas, this number could be at risk.”
He further added, “To be sure, there is some bump-up in demand in the second half of every fiscal from festivities such as Thanksgiving, Christmas, and the Chinese New Year, but this is unlikely to provide a significant offset.”
Guha opined that consequently, the Indian diamond industry is projected to shrink by over a third on an annualized basis this fiscal.
