While exports face headwinds, the ongoing festive season in India could provide some relief to the gems and jewellery sector. The $85-billion domestic market, supported by the reforms in the Goods and Services Tax (GST), could help offset part of the losses abroad 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 help, and while high-end jewellery has strong domestic potential, actual demand hinges on pricing and consumer sentiment,” says Vipul Shah, Past Chairman of the Gem and Jewellery Export Promotion Council (GJEPC).
Executive Director, GJEPC agrees that while domestic absorption capacity varies by sector and product segment, India’s jewellery market can absorb some of this share if issues around price-competitiveness and distribution are addressed.
“Also, for diamonds and high-end gold jewellery, India offers a strong market, but sales also depend on price and consumer sentiment. The GST Council’s moves to correct inverted duties and reduce GST on a range of consumer inputs will free up a lot of disposable income for consumers and will improve that possibility,” he said.
This is crucial at a time when the United States has doubled the tariff on Indian gems and jewellery to 50 percent, impacting nearly $10 billion worth of exports to America, with diamonds alone accounting for $7–8 billion.
The effective tariff rate for gems and jewellery will surge to 52.1 percent for the American market, impacting major hubs in Surat, Mumbai, and Jaipur, where the industry employs millions in cutting, polishing, and manufacturing. The sector is India’s fifth-largest export item, with goods worth nearly $30 billion shipped to key markets in FY25.
MD, Kama Jewellery says the decline in demand from the United States surely is a challenge, but the domestic market in India can absorb some of the exports produced.
India’s festive season that is currently underway since Ganesh Chaturthi leading into Diwali in October could ease the blow of Trump’s tariffs, but not by a lot.
The translation is not seamless, Colin Shah cautions.
“Export collections are made according to foreign consumers’ tastes, which are simple and modern, while Indian consumers opt for mostly traditional elaborate designs, particularly for weddings and religious festivals,” he adds.
The GST Council’s decision to exempt imports of natural cut and polished diamonds up to 25 cents under the Diamond Imprest Authorisation Scheme (DIAS) from Integrated GST (previously 18 percent) is expected to ease working capital pressures and support manufacturers and exporters engaged in small-diamond processing.
The reduction of GST on jewellery to 5 percent from 12 percent will also lower costs for retailers and exporters, while making packaging and gifting more affordable for consumers, benefiting both businesses and buyers.
He explains that the latest GST reforms contain measures that will help exporters’ liquidity and cost competitiveness, though they are not a substitute for relief from steep external tariffs.
“Most important for exporters are the faster, risk-based provisional refunds and several trade-facilitation and compliance-simplification steps announced by the Council. These measures free up working capital tied in refunds, reduce the time exporters wait for cash, and therefore improve short-term liquidity and pricing flexibility,” he adds.
He adds that the GST reforms have come as a relief as a simpler process to claim input tax credit and quicker refund mechanisms have strengthened the liquidity profile.
“In the past, delayed refunds kept significant working capital idle, but the faster processing now enables us to reinvest in manufacturing and stock. Moreover, compliance ease through electronic filings has lowered overheads in administration. Although these changes have improved cost-efficiency, one cannot ignore the effects of external tariff increases,” he said.
Government support key
Experts say that with the recent easing of working capital pressures, India’s gems and jewellery exporters are betting on diversifying to more markets owing to greater access through India’s free trade agreement with the UK, UAE, and Australia.
However, FTAs provide long-term benefits, hence exporters would need support from the government to tide over challenges in the short-run.
An industry expert explains the rationale for support is that while the GST reforms will aid domestic consumption by freeing up disposable income, cushioning part of the impact, these measures can’t fully offset the demand shock from punitive tariffs.
The US accounts for over a third (36 percent) of India’s diamond exports and almost half (over 45 percent) of its studded jewellery exports. With China witnessing a major slowdown in diamond demand post-Covid, the impact of US tariffs has been especially severe.
“The key is speed and consistency. Operationalise the 90 percent provisional refund mechanism immediately and ensure it works uniformly. Extend targeted credit lines for MSMEs. On our side, exporters must diversify into new markets while also stimulating local demand through e-commerce, campaigns, and retail tie-ups. Simplified compliance, better design, and skilling will give us the agility to pivot between global and domestic opportunities,” he said.
GJPEC’s agrees that in the short-run, industry will continue to need the government’s support in terms of cheaper credit, easing interest pressures for blocked goods to withstand working capital pressures, until the heavy dependence on the US market can be substituted.
This at a time when risks mount with US buyers turning to Israel and Belgium for natural diamonds, China for lab-grown stones and Italy, Thailand, Vietnam, Türkiye, UAE, and Mexico for finished jewellery.
He puts it, “GST reforms, however imperfect, have made Indian exporters more agile and robust to withstand disruptions in international trade.”
