Editor’s Note
This article highlights the significant financial impact of India’s new 50% export tariff on its natural diamond polishing sector. As the global hub for this industry, the projected 28-30% revenue decline underscores the policy’s immediate economic consequences for a key export market.
MUMBAI: The 50% tariffs on natural diamond exports from India will have the natural diamond polishing industry, which polishes 95% of global production and earns the majority of its income from the US, facing a steep 28-30% decline in revenue to $12.50 billion this fiscal year, compared to the $16 billion earned last fiscal.
This blow follows a 40% de-growth over the past three fiscal years due to falling prices and sales volume of natural diamonds, as demand in the US and China dropped while competition from lab-grown diamonds rose, Crisil Ratings said in a note on Thursday.
The industry, which polishes as much as 95% of the world’s diamonds, derives 80% of its revenue from exports, with the US accounting for 35% of exports. Sales have been falling after the US imposed a 10% tariff in April 2025; since then, the US share of India’s polished natural diamond exports slid 1,100 basis points in the first four months of this fiscal year to 24%.
The substantial 50% tariffs, effective from yesterday, make exports to the US challenging for two reasons: first, the industry’s low margins make absorbing the incremental levy very difficult, and second, declining demand for natural diamonds means passing on the incremental burden to consumers will not be easy. The resulting reduced operating leverage can erode the operating margin of polishers by 50-100 basis points and burden their credit profile, the agency said in a report based on an analysis of 43 diamond polishers, accounting for nearly a fourth of industry revenue.
According to Rahul Guha, a senior director with Crisil Ratings, the revenue of the domestic polishers industry is set to drop to its lowest since 2007. He added that while the UAE has emerged as a dominant hub for exports with its share doubling to 20%, the risks of a substantial downturn in revenue remain high.
The report advised diamond polishers to either increase domestic sales, push sales in alternative geographies, or set up polishing facilities in trading hubs, as rerouting via low-tariff nations is not a viable option. Even if retailers explore alternative sourcing options in lower-tariff countries such as the UAE or Belgium, a significant portion of the diamonds would still be polished in India and thus subject to higher tariffs.
Given the falling demand, American retailers are unlikely to absorb the tariff cost. Hence, operating margins of diamond polishers would decline to 3.5-4% after dropping 100 basis points in the past three fiscal years from a peak of 5.5% in fiscal 2023.
According to Himank Sharma, a director with Crisil Ratings, while limited reliance on external debt has helped diamond polishers maintain a stable capital structure, declining scale of operations and pressure on profitability will likely test their credit risk profiles. Specifically, while financial leverage is expected to be relatively stable at 0.7-0.8x, interest coverage can decline to 2x from 2.3-2.5x last fiscal.