Disrupting the Traditional Diamond Industry: The Rise of Lab-Grown Diamonds in India

The Indian diamond industry, long considered the global powerhouse of cut and polished diamonds (CPDs), is undergoing a significant transformation. Once driven by the unchallenged dominance of natural diamonds, the sector now finds itself grappling with a swift and disruptive challenger—lab-grown diamonds (LGDs). As consumers lean toward sustainability, ethical sourcing, and affordability, lab-grown diamonds are no longer a niche but a powerful movement shaking the foundations of the traditional diamond trade.

According to a recent report by credit rating agency ICRA, the country’s cut and polished diamond (CPD) exports are projected to fall by an additional 7-10% in FY2026, bringing total exports down to approximately $12 billion.

This anticipated decline follows a sharp 17% drop in FY2025, when exports slumped to a 20-year low of $13 billion. The sector had already suffered a staggering 28% fall in FY2024, signaling a prolonged downturn exacerbated by shifting consumer preferences, economic headwinds, and mounting competition from lab-grown and fancy-coloured diamonds.

Why Lab-Grown Diamonds Are Gaining Ground

The biggest advantage of lab-grown diamonds lies in their significantly lower production costs, ethical sourcing, and environmentally friendly manufacturing processes.

ICRA’s report reveals that LGDs now account for 8% of India’s polished diamond exports in FY2025, up from just 1% in FY2019. This exponential growth underscores how quickly consumer attitudes are evolving. Millennials and Gen Z—who increasingly drive luxury consumption—are choosing lab-grown diamonds over mined ones for their eco-conscious appeal and cost-effectiveness, often being priced 30-50% lower than natural diamonds of similar quality.

This market transformation also indicates that the rise of lab-grown diamonds is not merely a supply-side innovation. It reflects changing consumer values as well:

• Transparency: Customers today are more informed and are actively questioning the origin of their purchases. LGDs offer full traceability, something natural diamonds still struggle with due to opaque supply chains.
• Ethical concerns: With heightened awareness about conflict or "blood" diamonds, LGDs offer peace of mind by eliminating the social and ethical dilemmas often tied to mining.
• Sustainability: As global climate goals gain momentum, products with lower carbon footprints—such as LGDs—are being prioritized.

This paradigm shift is increasingly irreversible. Many analysts argue that while natural diamonds will continue to hold symbolic and resale value, LGDs are carving a separate and fast-growing niche, especially for everyday luxury, bridal segments, and fashion jewelry.

“We’re seeing a clear shift in consumer preferences towards lab-grown diamonds, and it’s driven by a combination of value, ethics, and design aspiration. Customers today are more informed they understand that lab-grown diamonds are chemically and optically identical to mined diamonds but come at a far more accessible price point enabling the customer to fulfill their design aspirations. For many, the idea of choosing a sustainable, conflict-free diamond without compromising on beauty or quality is empowering. Lab-grown diamonds also offer 100% exchange and buyback, which gives consumers added confidence and flexibility in their purchase decisions. The key advantages are they are 100% real diamonds supported with superior quality, transparency and affordability. The only challenge lies in perception or misrepresentation due to lack of awareness, but that’s rapidly changing as more consumers are taking more informed decision and rejecting dated ideas of luxury,” says Pooja Sheth Madhavan, Founder & MD, Limelight Lab Grown Diamonds," says Pooja Sheth Madhavan, Founder & MD, Limelight Lab Grown Diamonds.

Aryan Bawa, Founder, Iris Fine Jewels chimes in, “Lab-grown diamonds offer exceptional value, allowing buyers to purchase larger, higher-quality stones at 40–70% less than the cost of natural diamonds. They are 100% real and are certified by respected institutions like IGI and GIA. Lab-grown diamonds have become a fashion-forward choice, gaining popularity among Gen Z and Millennials and receiving endorsements from celebrities, solidifying their status as the modern, intelligent take on luxury.”

India’s Strategic Position in the Lab-Grown Segment

India is fast becoming a key hub for lab-grown diamond production and export. The cost advantage India enjoys in labour and processing makes it an attractive destination for large-scale LGD production. Several players are also investing in vertically integrated models, from growing diamonds to retailing them domestically and internationally, ensuring better margins and brand control.

Traditional Diamond Market Under Pressure

ICRA’s outlook for the traditional CPD segment remains grim. With CPD exports estimated to fall to $12 billion in FY2026, marking a 20-year low, the challenges are clearly structural and not merely cyclical.

A confluence of factors is eroding the sector's resilience:

• Weak demand in key markets like the US and China, which together account for the lion’s share of global diamond consumption.
• Economic uncertainty in these regions, leading consumers to either defer luxury purchases or opt for more budget-conscious alternatives like LGDs.
• Potential US tariffs on Indian diamonds, which could dampen export competitiveness further.
• Price crashes across the board, with polished diamond prices falling by 7% in FY2025 following a 17% plunge in FY2024. Even rough diamonds have seen an 8% decline, forcing miners to cut production to stabilize prices.

These dynamics have translated into shrinking profit margins for Indian CPD companies. According to ICRA, the Operating Profit Margin (OPM) for its sample CPD firms has declined by 400 basis points to around 4% in FY2025 and is expected to fall further to 3.6–3.7% in FY2026. With a stretched working capital cycle, inventory management becomes mission-critical for these players.

Can Both Markets Coexist?

While lab-grown diamonds are clearly eating into the market share of natural diamonds, industry experts believe there is room for coexistence, albeit with new roles defined:

• Natural diamonds may increasingly occupy the space of rare, ultra-luxury items with heirloom appeal.
• Lab-grown diamonds are likely to dominate high-volume, mid-market segments and newer age groups.

However, coexistence will require traditional CPD players to diversify their portfolios, embrace technological shifts, and rethink their branding strategies. Merely relying on legacy business models and past glories will no longer suffice.

Crystal Ball Gazing into the Diamond Segment

While the past two years have been marked by declining exports, falling prices, and squeezed margins, the growth of lab-grown diamonds presents a new path forward—for those willing to adapt.

As the ICRA report starkly outlines, the old guard of the CPD industry must face the new realities of changing consumer preferences, international competition, and evolving global trade dynamics. Lab-grown diamonds are not just a passing trend—they are a fundamental redefinition of what diamonds mean in the 21st century.

For India, embracing this change is not just a strategy—it’s a necessity for preserving its global leadership in the diamond trade.