India’s natural diamond polishing industry is set to experience a revenue drop of 25-27%, hitting a decade-low of $12 billion this fiscal year, according to a Crisil report released on Wednesday. The decline is driven by three reasons such as weaker demand in key markets like the US and China, a 10-15% fall in diamond prices amid oversupply, and a growing shift in consumer preference towards lab-grown diamonds (LGDs). The report highlighted that this is the third consecutive year of falling revenues, following a 29% contraction last year and a 9% drop in FY23.
The report points to a combination of sluggish demand due to oversupply, leading diamond polishers to cut back on purchasing rough diamonds and scaling down production.
In response to decline in demand, the report informed that miners have also reduced their output and eased inventory pressure to help stabilise the market. As a result, operating margins are expected to stabilise at around 4.5-4.7% by FY25.
Despite weak demand from the US—where India’s diamond exports have fallen 43% in the past two years—the industry is expected to maintain liquidity and manage credit profiles, thanks to lower working capital needs and reduced dependency on external debt.
The US, once accounting for over 40% of India’s diamond exports, now holds a reduced share of 35% in FY24. Meanwhile, China, which makes up 28% of India’s diamond exports, is witnessing rising demand for gold jewellery, as the precious metal is seen as a safer bet in uncertain economic times, the report adds.
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