The drop marks the third consecutive year of falling revenues for the sector, following a 29% contraction in FY23 and a 9% decline in FY22. The downturn is driven by multiple factors, including weakened demand in major markets such as the US and China, a 10-15% drop in diamond prices due to oversupply, and the rising consumer preference for lab-grown diamonds (LGDs).

The report highlights how an oversupply of rough diamonds and a global demand slump have led many diamond polishing units to scale back operations and cut back on raw diamond purchases. Miners have also responded by reducing their output in a bid to ease inventory pressure and stabilize the market.

Though demand remains weak in key markets like the US—where India’s diamond exports have plummeted by 43% over the last two years—the sector is expected to maintain liquidity. This is partly due to reduced working capital needs and lower reliance on external debt. Operating margins are projected to stabilize at 4.5-4.7% by FY25, offering some relief in an otherwise challenging landscape.

The US, which historically accounted for over 40% of India’s diamond exports, has seen its share shrink to 35% this fiscal year. Meanwhile, China, which constitutes 28% of India’s diamond exports, is witnessing an increasing demand for gold jewellery as a safer investment amidst global economic uncertainties.