Demand to drive gems & jewellery growth as exports slow: Crisil SME tracker

India’s gems and jewellery industry is predominantly made up of the micro, small, and medium enterprise (MSME) segment, which accounts for nearly 75 per cent of the sector by value.

 

This highly fragmented and labour-intensive industry is characterised by low capital intensity and high reliance on imported inputs, such as gold and rough diamonds.

 

It constitutes a significant 7-9 percent of the nation’s merchandise exports. While the sector’s domestic market is driven by gold jewellery, its export market in dominated by cut and polished diamonds.

 

Last financial year, demand for investment gold grew 25 per cent but that for jewellery fell 7 per cent. Overall, gold demand rose about 1 per cent in volume and 26 per cent in value terms.  Gold demand is projected to increase approximately 1 per cent in volume and 30-35 per cent  in value terms in FY26. India’s gems and jewellery exports declined over the last three financial years, particularly to the United States (US), which accounts for 30 per cent of these exports. 

 

In FY25, exports decreased an estimated 12 per cent in dollar terms, attributable to sluggish discretionary demand fuelled by economic challenges, geopolitical uncertainties and changing consumer preferences, as well as rising trade protectionism.  

 

Specifically, cut and polished diamond exports declined 17 per cent.

 

Meanwhile, the marginal 0.1 per cent decline in jewellery exports suggests resilient demand for finished jewellery products.

 

In FY26, ongoing unfavourable global conditions will hinder a substantial improvement, although a rise in gold jewellery exports will partially mitigate the impact. Despite these woes, India’s prominence in the global diamond trade, especially in the midstream segment, makes it difficult for other countries to substitute its position. Surat, a key diamond processing hub, hosts numerous MSMEs in this space.  

 

The sector’s substantial employment base in India is jeopardised by declining exports and further strain from US reciprocal tariffs.

 

The only glimmer of hope is the festive and wedding season in the second half of this fiscal which may boost domestic demand.