The diamond world has taken a new turn. Over the past few years, lab-grown diamonds were seen as the product of the future, but the situation has now changed significantly. While India was emerging as a global leader in this segment, the sudden fall in the market has brought new challenges for the entire industry.
Let us take a closer look at India’s lab-grown diamond industry and understand what is happening in this space.
About Lab-Grown Diamonds
Lab-grown diamonds are diamonds that are chemically, physically, and optically identical to natural ones. They are created using advanced technologies such as Chemical Vapor Deposition (CVD) and High-Pressure High-Temperature (HPHT). In simple terms, these diamonds are man-made in a controlled environment.
Even experienced gemmologists cannot differentiate them from natural diamonds without sophisticated testing equipment. The primary difference is that natural diamonds contain small traces of nitrogen, whereas lab-grown diamonds are nitrogen-free, helping professionals identify them.
Current State of India’s Lab-Grown Diamond Industry
Until 2024, nearly 90% of the world’s diamonds were processed in India, accounting for about 75% of the global turnover by value. According to the Industrial Extension Bureau (iNDEXTb), India is not only polishing diamonds but has also become a key production hub.
As per Wazir Advisors, India’s natural diamond market is valued at around $6.2 billion in FY25 and is projected to grow to $8.2 billion by FY28, with a CAGR of nearly 12%.
In FY25, India’s total diamond market stood at around $6.6 billion, dominated by natural diamonds. This is expected to rise to $9.2 billion by FY28.
The lab-grown diamond market, although smaller, is gaining importance. Its market size is estimated at around $400 million in FY25 and is projected to reach $600 million by FY28, with a CAGR of 14%. In 2023, India produced over 3 million lab-grown diamonds, contributing more than 15% of global production.
Government Support and Policy Initiatives
Recognising the potential of lab-grown diamonds, the Indian government has rolled out several incentives. In the Union Budget for FY24, a seed grant of Rs 242 crore (around $28 million) was allocated over five years to set up a dedicated lab-grown diamond research centre at IIT Madras.
Further, in the Union Budget for FY26, Finance Minister Nirmala Sitharaman announced zero customs duty on the import of carbon seeds for the current financial year. This aims to lower production costs and enhance India’s competitiveness.
Moreover, 100% foreign direct investment (FDI) is permitted in the gems and jewellery sector, encouraging global participation.
Price Decline and Market Crisis
The lab-grown diamond industry has witnessed a steep decline in prices since 2018. Prices of both one-carat and two-carat lab-grown diamonds have dropped by almost 96%. The primary reasons include higher production in China and India, excess supply, and weakening consumer trust.
According to The New Indian Express, diamond trade analyst Paul Zimnisky noted that lab-grown diamonds are currently sold at a 90% discount compared to natural diamonds. Back in 2015, the discount was only around 10%.
World Diamond Council President Feriel Zerouki stated that crashing prices are hurting consumer confidence. She believes that the lab-grown diamond ‘bubble’ has burst.
Impact on India’s Lab-Grown Diamond Industry
For India, this situation brings both growth and stress. In Surat and other diamond hubs, many small and medium units began producing synthetic diamonds post-2022 to diversify amid global shifts.
However, the market did not sustain its pace. In 2024, exports of polished lab-grown diamonds surged 50% in volume to 6.45 million carats from 4.28 million carats in 2022. Yet, export earnings dropped by 45%. This year, both export volumes and revenue have weakened further.
Reports from Surat suggest large investments have been made to install nearly 6,000 synthetic diamond reactors, employing around 40% of the existing cutting and polishing workforce. Since June, worker unions report that nearly 4 lakh workers in synthetic units are facing delayed payments or job losses.
Globally, synthetic diamond production reached 17.1 billion carats in 2024. While industrial and electronics applications will continue, their share in the gems and jewellery market, once valued at around $26 billion, is shrinking.
Return of Natural Diamonds and the Luanda Agreement
The natural diamond industry, which faced declining prices since mid-2022, is now seeing renewed demand. To capitalise on this shift, major producers have launched new initiatives.
The Luanda Agreement is a pact among key diamond-producing nations such as Angola, Botswana, the Democratic Republic of the Congo, Namibia, and South Africa. Under this agreement, member countries will collectively allocate 1% of their annual diamond sales revenue towards marketing natural diamonds.
According to Feriel Zerouki, falling synthetic diamond prices have reduced their desirability. This phase presents both challenges and opportunities for natural diamonds to strengthen their market appeal based on authenticity and rarity.
Future Outlook
For India, which does not mine rough diamonds but polishes over 90% of the world’s diamonds by volume and is a leading exporter, the scenario remains complicated. In 2023-24, India exported cut and polished diamonds worth around $18.2 billion.
Ideally, India could have benefited from the downturn in the synthetic segment. However, tariffs of over 50% imposed by the Trump administration on several Indian goods continue to weigh heavily on the industry. Since nearly 45% of India’s polished diamond exports go to the United States, analysts estimate a revenue decline of 28–30% in FY26.
Yet, there is cautious optimism. Domestic demand for natural diamonds remains steady, supporting a revival in cutting and polishing units. According to analysts quoted by The New Indian Express, India’s domestic natural diamond market has been growing by up to 20% annually since 2022 and could reach $4 billion by 2030.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
