India's lab-grown diamond industry is grappling with a series of significant challenges, including plummeting prices, eroding consumer trust, and intense competition from imports, according to a recent report by the Global Trade Research Initiative (GTRI). The report highlights that prices for lab-grown diamonds have dropped sharply by 65% within the past year, falling from ₹60,000 to ₹20,000 per carat, primarily due to local overproduction and an influx of imported diamonds.
GTRI's findings underscore the urgent need for corrective measures to address these issues, which are jeopardizing the growth and sustainability of the industry. The think tank points out that despite India's production overcapacity, the country continues to import large volumes of lab-grown diamonds, exacerbating the problem of oversupply and further driving down prices. This situation, coupled with a lack of regulation, has led to a decline in consumer confidence, creating a challenging environment for domestic manufacturers.
"The industry faces several challenges, including falling prices, intensifying competition both from local and imports, and the lack of clear regulatory frameworks. These issues pose potential risks to the sustained growth and profitability of India's lab-grown diamond sector," said GTRI Founder Ajay Srivastava.
The report calls for immediate government intervention to stabilize the industry. GTRI recommends the establishment of clear and consistent rules to standardize quality, certification, and market practices. Additionally, the implementation of a Quality Control Order (QCO) is suggested to ensure the quality of imported lab-grown diamonds, which would help protect domestic producers from substandard imports.
Moreover, the think tank emphasizes the need for increased investment in research and development to improve production processes, reduce costs, and enhance the quality of lab-grown diamonds. Such investments could help manufacturers stay competitive in a market that is becoming increasingly challenging.
The rapid decline in prices is also putting financial strain on manufacturers, many of whom have taken loans to purchase lab-grown diamond-making machines. With prices dropping so significantly, it has become difficult for these manufacturers to repay their loans, adding to the industry's woes.
The lab-grown diamond industry, which replicates the natural high-pressure, high-temperature conditions under which diamonds are formed in the Earth's mantle, has been seen as a high-growth sector in recent years. These diamonds are chemically, physically, and optically identical to natural diamonds, though typically produced in square or rectangular rough forms that require cutting and polishing. The value of a cut and polished lab-grown diamond is typically 6-8 times higher than its rough form.
Despite these challenges, the potential for the lab-grown diamond industry in India remains significant. However, to unlock this potential, GTRI stresses the need for a well-regulated and supportive environment that can help the industry navigate the current challenges and emerge stronger.
