An analysis of 43 diamantaires by Crisil Ratings, accounting for nearly one-fourth of the industry’s revenues, the tariff relief spells 6-7% revenue growth next fiscal. The rating agency however added that an elongated Middle East conflict casts a shadow on revenue and profitability of the sector.
Reduction in US tariff amid steady domestic demand will help Indian diamond polishers log a 6-7% on-year growth in revenue in fiscal 2027 to $15.0-15.5 billion.
The growth will ride on increased exports to the US following the interim trade deal that eliminated the 25% reciprocal tariff on Indian gems and diamonds—effectively bringing down the US tariff to zero1—though the escalating Middle East conflict could prevent diamond polishers from fully benefiting from it. The uptrend will follow three consecutive years of degrowth as revenue is expected to print lower in fiscal 2026, too. At $14.0-14.8 billion, revenue will be 8-10% lower on-year this fiscal due to volatility in duty and competition in the lab-grown diamonds segment, though better than our August 2025 expectation, Crisil Ratings said in a release.
The operating margin of diamantaires is expected to increase by 25-50 basis points to 4.25-4.50% in fiscal 2027, albeit lower than the 4.6-5.6% seen between fiscal 2021 and 2024.
Meanwhile, though prudent purchasing has reduced debt, credit profiles may remain impacted over the medium term. The Indian polished diamond industry generates 80% of its revenue from exports and the significant duty revisions in the last fiscal have led to a turbulent time for the diamantaires. As a result, the share of India’s direct polished diamond exports to the US fell to 16% in the first nine months of fiscal 2026, from 35% in fiscal 2025.
Next fiscal, however, a rebound is expected as demand remains intact, with export volume catching up to past year levels. The reciprocal tariff prompted diamond polishers to ramp up production before the deadline and explore alternative hubs such as the United Arab Emirates (UAE), Hong Kong, Thailand and Canada, mitigating the impact somewhat.
Says Rahul Guha, Senior Director, Crisil Ratings, “In fiscal 2027, export volume of polished diamond is expected to rise 4-6%, driven by the US tariff relief and multiple trade agreements. This will enable diversification of export revenue, while direct US exports recover as the economy rebounds and disposable incomes increase. Given that polishers import 70% of roughs from the UAE and Israel and exports 20% to them, the Middle East conflict may temporarily impact shipments. Other trading hubs may support shipments in case the conflict prolongs, like past tariff disruptions.”
Apart from these markets, China, another key market, faces challenges due to subdued consumer confidence. However, domestic volume surged 10-12% this fiscal and is expected to grow 14-17% next fiscal, on a low base and efforts to deepen penetration in tier 2 and 3 cities amid higher disposable incomes and rising affordability. Another headwind for natural diamond demand is the growth of economical lab-grown diamonds, despite similar characteristics. This is more evident in smaller carat diamonds. As a result, prices for rough and polished natural diamonds below 1.5 carat continue to decline, while prices of diamonds above 1.5 carat have sustained owing to steady demand amid
premiumisation. Average realisation is expected to decline 10-12% this fiscal and 6-10% next fiscal.
While controlled production by miners has limited the fall in prices, competition from lab-grown diamonds, now 60% of US volume, will cap operating profitability at 4.25-4.50%.
Diamond polishers have been cautious in buying rough diamonds due to flat volume growth and market volatility, keeping inventories lean. A recent temporary spike seen in receivables is likely to normalise over the next few months. The RBI’s relaxation of export receivables recovery requirements has also supported the segment’s credit profiles.
