Indian diamond polishers are likely to see a modest recovery next fiscal, with revenue projected to grow 6–7% to $15–15.5 billion in FY27, aided by tariff relief in the United States and steady domestic demand, according to a report by Crisil Ratings.

The anticipated rebound follows three consecutive years of decline, with industry revenue still expected to contract 8–10% year-on-year in FY26 to $14–14.8 billion amid volatile trade policies and intensifying competition from lab-grown diamonds.

US tariff relief to revive exports

The turnaround is expected to be driven primarily by improved export prospects to the US after the elimination of a 25% reciprocal tariff on Indian gems and diamonds under an interim trade arrangement.

The tariff disruptions had sharply dented shipments earlier. India’s direct polished diamond exports to the US dropped to 16% in the first nine months of FY26 from 35% in FY25, forcing exporters to divert shipments through alternative trading hubs such as the UAE, Hong Kong, Thailand and Canada.

“In fiscal 2027, export volume of polished diamond is expected to rise 4–6%, driven by the US tariff relief and multiple trade agreements,” said Rahul Guha, Senior Director, CRISIL Ratings. “This will enable diversification of export revenue, while direct US exports recover as the economy rebounds and disposable incomes increase.”

Geopolitical risks remain a key overhang

However, the outlook remains vulnerable to geopolitical disruptions, particularly the ongoing conflict in the Middle East.

Indian diamond polishers source nearly 70% of their rough diamonds from the UAE and Israel and export around 20% to these markets, making the region critical to the industry’s supply chain and trade flows.

Guha noted that the conflict could temporarily disrupt shipments, though alternative trading hubs may help mitigate the impact if tensions persist.

Margins to remain under pressure

Even as volumes recover, profitability is expected to remain subdued. CRISIL estimates operating margins of diamantaires will rise modestly to 4.25–4.50% in FY27, still below the 4.6–5.6% range seen between FY21 and FY24.

Rising competition from lab-grown diamonds, which now account for about 60% of US diamond volumes, continues to weigh on natural diamond prices, particularly for stones below 1.5 carat.

“Credit profiles of polishers have weakened somewhat as a sharp decline in profitability has affected their interest coverage ratios in the recent past,” said Himank Sharma, Director, Crisil Ratings. “With reduced inventories leading to lower working capital requirement, reliance on debt has reduced steadily. This along with slightly improved profitability next fiscal, will alleviate the stress on the credit profiles.”