SME tracker: Domestic cushion for gems & jewellery MSMEs amid export woes

The gems and jewellery industry contributes 7-9 per cent to India’s merchandise exports, with micro, small and medium enterprises (MSMEs) accounting for nearly 75 per cent of the industry by value.

 

The highly fragmented and labour-intensive industry relies on imported raw materials such as gold and rough diamonds, exposing it to demand fluctuations and geopolitical disruptions.

 

In FY26, overall domestic demand declined by 9 per cent due to elevated gold pri­ces. Investment demand inc­reased 23 per cent year- on -year (Y-o-Y), while jewellery demand declined 22 per cent.

 

The demand mix also shifted. Investment gold and gold jewellery accounted for 41 per cent and 59 per cent of the demand, respectively, in FY26, against 31 per cent and 69 per cent in FY25. However, higher prices drove value growth of 42 per cent.

   

Domestic gold demand is expected to decline 4-6 per cent by volume in FY27 but grow 17-20 per cent by value, reflecting continued investor preference for gold as a safe-haven asset. 

 

Export performance, however, remains weak. Gems and jewellery exports fell 5 per cent in dollar terms in FY26, marking the fourth consecutive year of decline. The slowdown was particularly evident in the US 

 

mar­ket, whose share of India’s gems and jewellery exports declined to 18 per cent from 33 per cent in FY25. Weak discretionary spending, economic uncertainty, geopolitical tensions and rising trade protectionism continue to weigh on demand.

 

Exports of cut and polished diamonds fell 9 per cent, while jewellery exports grew a marginal 0.5 per cent, indicating relatively resilient demand for value-added jewellery products.

 

The ongoing West Asia conflict has further exacerbated the sector’s challenges by lengthening cash conversion cycles for exporters. Delayed collections, exten­ded credit periods, stricter banking checks, higher freight costs and elevated war-risk insurance premiums have increased working capital requirements and financing costs, thereby pressuring profitability.

 

Export-oriented manufacturers and wholesalers, particularly those with exposure to the Gulf region, remain more vulnerable than large branded retailers, which benefit from stronger liquidity, faster inventory turnover and more diversified revenue streams. 

 

Amid persistent export headwinds, the upcoming festival and wedding season in the latter half of the calendar year is expected to support domestic jewellery demand, offering the industry some relief in an otherwise challenging operating environment.