Simmering U.S.-China trade tensions could nudge many global jewellery majors to shift their manufacturing base to India from China. The relocation of manufacturing facilities will give a much-needed boost to India’s gem and jewellery exports, which fell about 10% in the three months to June 30. Tighter lending rules and higher borrowing costs in the nation as a fallout of a $2 billion bank fraud last year have worsened the operating environment for the business that contributes 15% of India’s exports.

“Some major global players in gems and jewellery are pausing to re-balance the business on account of the trade tensions,” Romesh Sobti, Chief Executive Officer at Mumbai-based IndusInd Bank Ltd., said in an interview. “The natural shift in the manufacturing business will be to India from China.”

“While a possible shift of manufacturing base by companies looking to deleverage their China strategy is in the offing, there will be hurdles for entry into India”, Colin Shah, Vice Chairman at the Gem & Jewelry Export Promotion Council, revealed. The South Asian nation is a natural destination for the shift in business from China because of skilled labor and decades of experience in cutting and polishing diamonds.

“Unless there is a favorable tax regime and ease of doing business it would be challenging for the industry to move from China to India,” Shah said. IndusInd is among the top 3 banks financing the global diamond business, according to the council backed by the nation’s government.