Export of cut and polished diamonds may fall 22% in FY24 on weak demand: Report

India’s export of cut and polished diamonds (CPDs) is expected to decline by 22% to $17.2 billion in FY2024 due to subdued demand from the key consuming nations, according to rating agency ICRA. The rating agency noted that CPD exports have been falling since second half of financial year 2023. During April-August period of FY2024, CPD exports plunged by 31% due to decline in both export volumes and polished diamond prices.

Though some sequential improvement in volumes is predicted in the coming months, helped by the onset of the festive season, overall exports are expected to shrink by about 10% year-on-year in the second half of the current financial year. As a result, the rating agency has revised the sector outlook to ‘Negative’ from ‘Stable’.

“The export contraction is primarily being driven by weak underlying demand conditions in key consuming nations like the US and Europe due to inflationary pressures, leading to a shift in spending away from diamonds,” said Sakshi Suneja, Vice President & Sector Head, ICRA. Further, Suneja said that demand from China, which accounts for 10-15% of the global demand, has also not picked up meaningfully so far.

Furthermore, the decline in volumes, especially for large-sized diamonds ranging from one to three carats, was intensified due to competitive pricing of lab-created diamonds, which are considerably inexpensive than natural diamonds. The share of lab-grown diamonds in India’s overall CPD exports have been rising consistently.

Elevated prices of rough diamonds

The rating agency said that prices of rough diamonds continue to remain high in year-to-date FY2024, with current prices hovering around the 15-year median level, even though prices have fallen in recent months. The prices of rough diamonds have surged over the past two years due to limited supply from mining companies and a strong recovery in demand after the pandemic. 

Despite a subsequent decline in demand, rough diamond prices have remained high due to limited availability from Russia in the market. This is because of US sanctions on Alrosa PJSC, which is a Russian-owned diamond mining company responsible for supplying approximately 30% of the world’s rough diamonds. Moreover, rough prices are expected to remain elevated due to tightening sanctions on Russia and no major increase in production of other mining entities. 

Meanwhile, prices of polished diamond prices continue to be under pressure, with current prices 15-20% below the 15-year median level. In addition, demand pressures and the limited ability to pass on the higher costs is expected to reduce operating profit margins of diamond companies by 40 basis points to about 5% in FY2024.


The rating agency said that profitability pressures will lead to moderation in the credit metrics of CPD entities in FY2024 and inventory levels are also expected to increase to an extent due to lower demand. The rating agency stated that CPD entities have been cautious in managing their working capital cycle to control their dependence on bank debt. Moreover, ICRA’s channel check estimates that players are not stockpiling rough diamonds due subdued off-take of polished diamonds.

“Some relaxations have been provided by miners in the form of deferment of part of the purchases to the next year. Additionally, recovery from customers has been timely so far. These factors would keep working capital borrowings of the industry under check,” Suneja said about the the credit profile of the CPD players. As a result, ICRA expects the interest cover of CPD players in its sample set to soften in the range of 3.5-4 times in FY2024, compared with 4.5 times in FY2023 and 6.7 times in FY2022.