India’s Manufacturing Sector Faces Decade-Low Revenues 

India’s polishing revenues will plummet to their lowest in a decade this year, as prices have dropped and inventory has built up, a credit agency has warned. 

Diamond sales will drop up to 27% to $12 billion in the fiscal year ending March 31, 2025, India-based Crisil Ratings estimated last week. This is also the third fiscal year the manufacturing sector will have contracted, following declines of 29% a year ago and 9% in 2023, it added. 

The decrease is “mainly on account of three reasons: one, muted demand in key export markets of the US and China; two, a 10% to 15% fall in diamond prices amid oversupply; and three, [a] shift in consumer preference towards lab-grown diamonds,” the organization explained.  

Indian diamond exports to the US have fallen 43% by value over the past two years due to sluggish demand. Meanwhile, in China, which accounts for 28% of India’s exports, preference for gold jewelry is growing, as consumers perceive it to be a safer asset, noted Crisil, which is a subsidiary of US credit agency S&P Global. Additionally, the younger generation of shoppers in both markets have been shifting toward synthetics over natural. 

“Lab-grown diamonds, which resemble natural diamonds, are 90% cheaper,” said Rahul Guha, director of Crisil. “Their market share has increased to about 25% by value in the US from 8% two years ago. The share would have been higher, if not for the sharp fall in lab-grown diamond prices owing to supply outpacing demand. As a result, [the] revenue of natural-diamond exporters may continue to face serious headwinds.”  

However, because of the slow demand, polishers have been limiting purchases of rough and have curbed manufacturing, while miners have cut production, which has helped temper the price fall, Crisil said. The organization believes this will help stabilize margins in fiscal 2025. 

“Due to persistent price falls in recent fiscals, polishers have curtailed purchases and miners have implemented production cuts while offering flexible procurement terms to partially alleviate working capital pressure for polishers,” said Rushabh Borkar, associate director of Crisil. “Inventory levels across the value chain are expected to decline, mitigating pricing risks and reducing reliance on external borrowing over the medium term.”

Image: A diamond being polished. (Shutterstock)