Surat Diamond Tariff Hike: Ahmedabad News
Surat’s Diamond Industry Faces Turbulence Amidst Shifting Demand and US Tariffs
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Surat, India – known as the diamond capital of the world – is navigating a challenging period marked by declining demand for natural diamonds, a surge in lab-grown diamond (LGD) production, and the looming threat of increased US tariffs. The city’s bustling diamond cutting and polishing units are adapting, but uncertainty hangs over the future of the industry, especially as the peak Christmas season approaches.
The Downturn in Natural Diamond Demand & Rise of LGDs
A “prolonged period of lower demand” for natural diamonds prompted major players in Surat to attempt market stabilization. This slowdown coincided with a significant shift within the industry: a move towards the production of LGDs, which offer a more affordable alternative to thier natural counterparts.
The impact on Surat’s workforce has been considerable. Diamond cutting and polishing units have been forced to curtail production, reducing working hours for polishers. Many have diversified into LGD production to stay afloat.
Ghanshyam Patel, owner of a natural diamond factory in Katargam, Surat, exemplifies this trend.He’s drastically reduced his workforce from over 70 polishers to just 10, pivoting his business to focus on LGDs.”For natural diamonds, we need more capital on hand, while LGD is less capital-intensive,” Patel explained. “There is a major price variation in both diamonds. Now the LGD prices have also gone down, so we are facing tough times. Several of our emery wheels are lying in the corner of the factory after the lay-offs.”
This shift isn’t simply about cost. LGDs are chemically, physically, and optically identical to natural diamonds, offering consumers a compelling value proposition.However, the recent price decline in the LGD market is adding another layer of complexity to an already challenging situation.
US Tariffs Add to Industry woes
Adding to the pressure, the United States – a key market for Indian diamonds – recently announced increased tariffs on certain diamond imports. The industry is anxiously awaiting August 27th to assess the full impact.
Jewellery exporter Sevanti Shah of Venus gems, a veteran of six decades in the business, remains cautiously optimistic. “We have to watch the situation till August 27. Even if the tariff is high, buyers in the USA who want to purchase diamond-studded jewellery will surely shop for their loved ones. They may compromise on the size, but they will surely buy it.”
The stakes are high, as the volume of business for gems and jewellery traditionally peaks during the Christmas season. The tariffs threaten to dampen demand and disrupt supply chains.
Diversification and government Support
Some businesses are mitigating the impact of the downturn by exploring new markets. Chunibhai Gajera of Laxmi Diamonds, another Surat-based exporter, has seen growth in recent years by focusing on the Middle East and other countries, a strategy accelerated by the Russia-Ukraine war. This diversification demonstrates the industry’s resilience and adaptability.
Recognizing the severity of the situation, the Gem & Jewellery Export Promotion Council (GJEPC) has appealed to the indian Commerce Ministry for assistance. On August 7th, the GJEPC proposed a targeted reimbursement mechanism to offset the US tariffs, suggesting coverage of 25-50% of the additional costs incurred between August 2024 and December 2025.
Sabyasachi Ray, Executive Director of GJEPC, emphasized the urgency of the situation, stating the council’s commitment to supporting the industry through these turbulent times.
The Surat diamond industry is at a crossroads.While the shift towards LGDs offers a potential pathway to sustainability, the industry faces ongoing challenges from fluctuating demand, price volatility, and international trade policies. The coming months will be critical in determining the long-term future of this vital sector of the indian economy. The industry’s ability to adapt, innovate, and secure government support will be key to weathering the storm and maintaining its position as a global diamond hub.