The United States has removed a 25% tariff on Indian gems and diamonds, a move that should bring much-needed relief to the country’s diamond polishing industry. The decision is likely to boost export growth and improve demand for Indian cut and polished diamonds in the US market.
With the reciprocal duty on Indian gems and diamonds now effectively reduced to zero, diamantaires expect 6-7% year-on-year revenue growth in the sector to $15.0-15.5 billion in FY2027, according to Crisil Ratings.
But the rating agency warned that escalating conflict in West Asia could limit the extent to which diamond polishers benefit from the tariff relief, as geopolitical tensions could disrupt trade flows.
“Given that polishers import 70% of their raw material from the UAE and Israel and export 20% to them, the conflict in the Middle East may temporarily affect shipments. Other trade hubs may support shipments if the conflict drags on, such as the past tariff violations,” said Rahul Guha, senior director at Crisil Ratings.
Sharp tariffs are hurting the diamond industry
India’s polished diamond industry generates 80% of its revenue from exports, and significant tariff revisions in the last fiscal led to a turbulent period for diamantaires, the agency noted.
Due to trade disruptions, the share of India’s direct exports of polished diamonds to the United States fell to 16% in the first nine months of fiscal 2026 from 35% in fiscal 2025.
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The reciprocal duty prompted diamond polishers to ramp up production ahead of schedule and explore alternative trading hubs such as the United Arab Emirates (UAE), Hong Kong, Thailand and Canada, which helped cushion the impact, according to Crisil Ratings.
The sector follows the rebound
After a period of hardship and declining growth in the sector, the diamond polishing industry is hopeful of a recovery in the next fiscal as demand remains intact and export volumes are expected to reach last year’s levels.
The upward trend will be followed by three consecutive years of decline as the sector is expected to record lower revenues in fiscal 2026 as well. At $14.0-14.8 billion, sales in the current fiscal will be 8-10% lower year-on-year due to duty volatility and competition in the lab-grown diamond segment, the agency said.
How big is the US market for Indian exports?
The US market typically accounts for 35-37% of India’s polished diamond exports, and its increased availability is expected to boost export volumes by 4-6% by FY2027, supporting earnings as the US economy improves.
But there are headwinds that could erode demand for natural diamonds as they face increasing competition from cheap, lab-grown diamonds that have similar properties to real gemstones.
As a result, prices for rough and polished natural diamonds below 1.5 carats continue to decline, while prices for diamonds above 1.5 carats have held up due to steady demand and premiums.
While controlled output by miners has limited price declines, competition from lab-grown diamonds, which now account for 60% of U.S. volume, will limit operating profitability to 4.25-4.50%, the agency said.
