India’s natural diamond polishing industry is bracing for a steep 28-30% revenue decline this fiscal, dropping to about $12.5 billion from $16 billion last year, after the US imposed 50% tariffs (25% reciprocal and 25% penalty). This follows a three-year slump of nearly 40% due to weaker demand in the US and China, falling prices, and rising competition from lab-grown diamonds.
Margins are under strain, as low profitability leaves little room to absorb the tariff impact while subdued demand makes it hard to pass costs onto buyers. According to CRISIL Ratings’ analysis of 43 major polishers representing a quarter of the industry, operating margins could shrink by 50-100 basis points, pressuring credit profiles.
The US, traditionally India’s top export destination, has seen its share of polished diamond imports from India fall from 35% to 24% in the first four months of FY26, after a 10% tariff was introduced earlier in April. Meanwhile, exports spiked 18% in July as Indian firms rushed to meet festival-season demand.
Competition from lab-grown diamonds, now holding ~60% of the US market by volume, and subdued Chinese demand add further challenges. While the UAE has doubled its share of Indian exports to ~20%, revenues are expected to slide to their lowest since 2007.
Industry experts highlight three possible coping strategies: boosting domestic demand, expanding exports to alternative markets, and exploring offshore polishing units. However, with US retailers unlikely to absorb tariff costs, operating margins are projected to dip further to 3.5-4%, down from a peak of 5.5% in FY23.
Despite reduced debt reliance keeping capital structures stable, declining scale and profitability could weaken credit risk profiles. Interest coverage may slip to around 2 times, compared to 2.3–2.5 times last fiscal. Analysts stress that the industry’s resilience will depend on navigating tariff shifts, geopolitical uncertainties, and evolving consumer demand.
