De Beers pushes back as India’s diamond industry faces a downturn

India’s diamond industry is witnessing one of its toughest phases in recent years, with exports plummeting due to weakened global demand and rising competition from lab-grown diamonds (LGDs). Yet, Amit Pratihari, De Beers India managing director remains optimistic, asserting that the long-term potential of natural diamonds remains strong despite short-term market fluctuations.

According to a report by rating agency ICRA, India’s cut and polished diamond (CPD) exports contracted by 28% in FY24 due to worsening global macroeconomic conditions and increased LGD competition. The slump continued in FY25, with CPD exports shrinking 19% in the first four months. Additionally, data presented in the Rajya Sabha in December by Commerce and Industry minister, Piyush Goyal, revealed that India’s diamond exports fell from $25.48 billion in 2021-22 to $18.37 billion in 2023-24, while imports dropped from $28.86 billion to $23 billion in the same period.

Despite these challenges, Pratihari sees India’s diamond sector as resilient. “If you look at the whole diamond jewellery penetration in India, it’s less than 10%,” he said. “So there’s a huge opportunity for diamond as a category to grow. This $17 billion market could reach $22-24 billion.” He remains bullish on the country’s economic trajectory, citing projections that India’s economy will expand to $7.9 trillion by 2030, with per capita income surging to nearly $5,000. “A young country with rising disposable income will drive demand for luxury goods, including diamonds,” he added.

Natural versus lab-grown diamonds

A major challenge facing natural diamonds is the rapid growth of lab-grown alternative, which offer consumers a lower-cost option with similar aesthetics. A McKinsey & Company report highlights three key trends affecting the industry: the success of LGDs, increasing consumer demand for ESG (environmental, social, and governance) transparency, and sanctions on Russian rough diamonds.

To the naked eye, lab-grown diamonds are identical to mined diamonds but cost 40% to 50% less. In 2022, the global lab-grown diamonds market was valued at $24 billion and is projected to reach $59.2 billion by 2032, according to Allied Market Research.

However, despite being marketed as sustainable and environmentally friendly, De Beers claims that the production of laboratory-grown diamonds is an energy-intensive process. Even the raw materials used for lab-grown diamond growth, such as methane gas and graphite, are generally tied to mining processes. Yet, when asked for a direct comparison of the carbon footprint between lab-grown and natural diamonds, no absolute data or figures were shared.

Amid the lab-grown diamond industry boom, China and India have risen as the top-producing and exporting countries, relying largely on coal to produce lab-grown diamonds, according to the Natural Diamond Council. Over 60% of lab-grown diamonds are produced in China and India, where 63% and 74% of grid electricity, respectively, comes from coal, the council said in its 2023 analytical report.

Pratihari, however, dismisses the notion that LGDs pose a significant long-term threat to natural diamonds. “Comparing synthetic diamonds to natural ones is not a fair comparison,” he said. “Both products are completely different. Synthetic diamonds are more about creating confusion, but they have their own space in the fashion jewellery market.” Infact, he predicts that LGDs will increasingly replace cubic zirconia rather than disrupt the demand for natural stones.

He also pointed out the declining profitability of LGD brands. “I have not seen a single profitable synthetic diamond brand,” he shared. “Wholesale prices have dropped 98%, and retail prices have fallen nearly 80%.” While LGDs may gain traction in certain consumer segments, Pratihari believes they lack the emotional and commercial value associated with natural diamonds. “Nobody wants a synthetic diamond for an engagement ring,” he said. “We saw early adoption in the US, but now consumers are taking a U-turn.”

Government stance and regulatory framework

With growing concerns about the impact of LGDs, there have been discussions around government intervention in the diamond industry. However, Commerce and Industry Minister Piyush Goyal has ruled out increased regulation, emphasising that excessive intervention could hinder growth. “Wherever we have given a free hand, the industry has prospered. Bringing more regulation is not in the interest of the industry,” he said today during Question Hour in the Rajya Sabha.

Goyal also highlighted that the Kimberley Process Certification Scheme for natural diamonds remains widely accepted in international markets, reinforcing the credibility of India’s exports. Meanwhile, the government’s push for LGD production is primarily focused on industrial applications such as semiconductors and water purification rather than jewellery.

“The government is not promoting synthetic diamonds to replace natural ones,” Pratihari echoed. “If India replaces a high-value product with a cheaper one, it will impact our GDP. The focus on LGDs is for industrial use, not jewellery.”

What does the future hold?

While the current downturn presents a challenge, Pratihari remains confident that the industry will rebound. “We’ve seen temporary slumps before, during events like World War II and Covid-19. This is another phase,” he opines. He also points out that despite falling rough diamond prices, consumer prices at retail stores have remained stable. “The softness in pricing is due to what’s happening in the US and China, which together account for 70-75% of the global market. But India has now emerged as the second-largest diamond consumer.”

Investments in the sector remain strong, with players like Aditya Birla investing in luxury retail and BlueStone securing a $1 billion pre-IPO valuation. Market leader Tanishq continues its aggressive expansion plans, reinforcing confidence in the long-term viability of the diamond business.

Looking ahead, Pratihari is focused on growing De Beers’ presence in India. “In five years, we aim to reach $100 million in revenue,” he said. “Right now, we’re opening 15 stores, and we see India as a key market for natural diamonds.”

While India’s diamond industry is facing headwinds, De Beers remains steadfast in its belief that natural diamonds will retain their allure. The road ahead may be challenging, but as Pratihari put it, “This is a temporary phenomenon. The industry has always adapted and evolved, and it will continue to do so.”