India’s decision to provide a tax holiday for the import and processing of rough diamonds is expected to give the country’s struggling diamond industry a significant boost, with exporters targeting an additional $3–5 billion in exports.
The measure is aimed at strengthening India’s position as a global diamond-cutting and polishing centre and encouraging more rough diamonds to be processed domestically rather than in competing markets.
India is one of the world’s largest centres for diamond cutting and polishing, with Surat serving as the main hub for the industry. The sector employs a large workforce and is a major contributor to India’s gems and jewellery exports.
Tax relief to improve competitiveness
The tax incentive is expected to reduce the cost burden faced by diamond processors and exporters. Industry players have been seeking measures to improve competitiveness as weaker global demand, high inventory levels and changing trade patterns have put pressure on the sector.
The tax holiday could make it more attractive for international mining companies and diamond traders to route rough stones through India for processing. This could increase the volume of rough diamonds entering the country and subsequently raise exports of polished stones.
Focus on restoring diamond exports
India’s diamond exports have faced challenges in recent years amid softer consumer demand in key markets, particularly the US and China. The industry has also been affected by fluctuations in rough diamond prices and competition from other processing centres.
Industry representatives expect the tax relief to help restore export momentum by lowering costs and improving margins for Indian processors.
The proposed $3–5 billion increase in exports would provide an important boost to India’s overall gems and jewellery trade and could support activity across cutting, polishing, logistics, financing and related services.
Surat expected to benefit
Surat, which handles a large share of the world’s diamond cutting and polishing activity, is expected to be one of the biggest beneficiaries of the policy.
Higher rough diamond imports could increase utilisation at processing facilities while generating additional demand for skilled labour, technology, logistics and financial services.
The move could also help India maintain its competitive advantage in value-added diamond processing at a time when the global industry is undergoing structural changes.
Global trade implications
The policy comes as diamond-producing countries and international mining companies look to adjust supply chains in response to changing demand and market conditions. By offering tax support, India is seeking to attract a larger share of global diamond-processing activity.
If successful, the measure could strengthen India’s role in the international diamond supply chain and help the country move toward higher-value exports.
The industry will nevertheless remain dependent on global jewellery demand, rough diamond availability and prices. A sustained recovery in major consumer markets will be important for the tax incentive to translate into long-term export growth.
Overall, the tax holiday represents a significant policy push for India’s diamond industry, with the government and industry hoping that lower costs and stronger competitiveness can generate $3–5 billion in additional diamond exports and reinforce India’s position as a leading global diamond-processing hub.
