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India's natural diamond polishing industry is set to suffer a significant revenue contraction of 28–30% in FY26, falling to around $12.5 billion, according to a report released by Crisil Ratings. The decline is largely attributed to a steep 50% tariff on Indian diamond exports to the United States, which took effect this week.
The US tariffs include an additional 25% levy implemented on August 27, 2025, as a response to India’s continued import of Russian oil. This comes on top of the 25% reciprocal tariff imposed by former President Donald Trump in April. Combined, these measures have rendered Indian polished diamonds far less competitive in one of its largest export markets.
In FY25, India’s polished diamond industry had already seen revenues shrink to $16 billion, following a cumulative 40% decline over the past three years due to a combination of falling global demand — particularly from the US and China — and increasing competition from lab-grown diamonds.
“The industry is already operating on thin margins,” Crisil noted, “and the new tariffs severely limit its ability to absorb additional costs or pass them on to consumers.” With 80% of the industry’s revenues derived from exports and the US accounting for 35% of that share, the report warns of significant pressure on operating margins — estimated to fall by 50–100 basis points — and a likely weakening of credit profiles for several players in the sector.
The impact of trade barriers had already started showing earlier this year, with the US share in India’s polished diamond exports dropping by 1,100 basis points to 24% in the first four months of FY26. Despite a temporary spike in July exports — up 18% year-on-year — driven by pre-festival inventory build-up, the outlook remains bleak.
The report also highlighted the growing threat from lab-grown diamonds, which now command 60% of the US market share by volume, and the subdued demand from China, further compounding challenges for the Indian diamond polishing sector.
Crisil concluded that the combination of punitive tariffs, soft global demand, and structural competition from synthetics could significantly reshape the dynamics of India’s natural diamond industry in the coming quarters.
