U.S. tariff hike to cut Indian diamond polishers’ revenue by 28-30% this fiscal : CRISIL

NEW DELHI : The imposition of 50% tariffs (25% reciprocal plus 25% penalty) by the U.S. on gem and jewellery is expected to lead to a revenue fall of India’s natural diamond polishing industry by a steep 28-30% to $12.50 billion this fiscal, compared with $16 billion last fiscal, CRISIL Ratings said in a note.

The sector that polishes 95% of all the diamonds in the world is facing an unprecedented downturn, with revenues anticipated to reach a low point since 2007.

Revenue Hit After Years of Decline
The sector contributed $16 billion in FY25 and has been struggling for the past three years, facing a contraction of around 40%, largely due to lower demand in core markets such as China and the US. The increased popularity of lab-grown diamonds and price erosion also contributed to the fall in demand.

However, with the new tariffs, exporting to the US will be even more difficult, as the industry already has a low margin and a limited ability to pass any additional costs on to end consumers.

Margins and Credit Profiles Under Pressure
As explained before, the sector already faces low margins, and these are expected to shrink even further to 3.5-4% compared to 5.5% in FY23. The leverage shall be stable, but interest coverage can fall to 2 times (compared to 2.5 times last fiscal), thereby increasing total risk.

US Market Share Shrinks
Besides the tariffs, the consistent shrinking of the US market is a cause for concern for the sector. The US accounts for almost 35% of polished diamond exports, but the share has dropped to 24% in the first four months of the current financial year.

However, the sector is actively looking for alternative markets. For example, the UAE has doubled its share to 20 per cent of India’s exports, emerging as a key hub. Domestic consumption has also been increasing gradually, though it lacks the scale to offset international losses. Still, analysts note that rerouting exports through low-tariff countries, such as the UAE or Belgium, offers limited relief, as most diamonds are polished in India and thus remain subject to tariffs.

Industry Response and Outlook
Diamond polishers are expected to adopt tighter inventory management to control debt, while miners have already scaled down production to support prices. Going forward, the industry’s resilience will hinge on its ability to expand domestic sales, diversify into new geographies, and explore offshore polishing facilities.