India's gems and jewellery sector, valued at over $85 billion domestically, is bracing for a challenging export season after the United States doubled tariffs on Indian gems and jewellery imports to 50% impacting nearly $10 billion worth of shipments, including $7-8 billion in diamonds. The new tariff regime raises the effective duty to 52.1% striking at major hubs in Surat, Mumbai, and Jaipur, where millions are employed in cutting, polishing and jewellery manufacturing.
While exports face severe headwinds, industry leaders say the ongoing festive season in India, coupled with recent Goods and Services Tax (GST) reforms, may cushion part of the blow. The domestic market, driven by Ganesh Chaturthi to Diwali demand, provides a crucial buffer as exporters shift focus inward.
"The domestic $85-billion jewellery market offers a safety net, provided we sharpen price competitiveness and expand distribution. GST corrections on inverted duties and reduced rates support demand, but consumer sentiment and pricing remain the real drivers," said Vipul Shah, Past Chairman of the Gem and Jewellery Export Promotion Council (GJEPC).
GST Reforms: A Critical Cushion
The GST Council's recent moves including cutting GST on jewellery from 12% to 5%, exempting imports of natural cut and polished diamonds up to 25 cents from IGST (18%), and ensuring faster provisional refunds-have eased working capital constraints for manufacturers and exporters.
"These measures free up liquidity, reduce refund delays and lower compliance costs. The reforms have definitely improved cost efficiency and pricing flexibility, though they cannot replace relief from steep US tariffs," noted Colin Shah, another industry veteran.
Exporters highlighted that quicker input tax credit claims and risk-based refunds have reduced idle working capital, enabling reinvestment in manufacturing and stock-building ahead of the festive rush.
Domestic vs. Export Market
Despite domestic opportunities, experts caution that Indian consumer preferences differ sharply from global demand."While exports cater to modern, minimalist tastes, India's buyers lean toward elaborate traditional jewellery, especially for weddings and festivals. The translation is not seamless," Shah added.
MD of Kama Jewellery pointed out that while domestic sales may absorb some of the displaced exports, the scale is limited: "The decline in US demand is a challenge, but festive demand here can partially bridge the gap."
Government Support and Diversification
The industry is also banking on India's free trade agreements (FTAs) with the UK, UAE and Australia for long-term relief. But in the short term, exporters seek targeted government support, including cheaper credit lines, easing interest burdens, and operationalising the 90% provisional refund system without delays.
GJEPC officials stress that India must diversify exports beyond the US, particularly as American buyers pivot to Israel, Belgium, China and other competitors for diamonds and finished jewellery.
"GST reforms, however imperfect, have made Indian exporters more agile. What's critical now is speed and consistency in government support so the sector can withstand global trade disruptions," a GJEPC executive concluded.
Outlook
With the US accounting for 36% of India's diamond exports and nearly 45% of studded jewellery exports, the tariff hike is a significant setback. However, festive season demand, GST reliefs, and domestic consumption trends are expected to soften the impact, even if they cannot fully offset losses.
For now, India's gems and jewellery industry is walking a tightrope-balancing between global trade shocks and the resilient domestic market, with reforms offering some breathing space amid mounting risks.
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