India's Home-Grown Diamonds
February 09, 23
India cuts and polishes the vast majority of the world's diamonds. But without its own mines, it's never been able to capture the full cycle of production - until now. The increasing popularity of lab growns, and the apparent enthusiasm of India's government to promote their domestic manufacture, is changing that. Finance minister Nirmala Sitharaman scrapped a five per cent import tax on the seeds from which diamonds are grown in her annual budget last week.She also announced a grant to fund five years of research and development to help India produce its own diamond seeds and become less reliant on imports.
Last November the state government in Surat scrapped a 15 per cent duty on electricity for lab grown manufacturers - a significant saving for an energy-heavy industry using high pressure and high temperature production methods.. And in August the government-owned State Bank of India (SBI) said it would start lending to manufacturers so they can invest in lab grown machinery. Lenders have been particularly wary of lab growns diamonds manufacturers in the past, but the SBI move could set a new tone. The war in Ukraine has undoubtedly heightened the sense of urgency in terms of available rough diamonds. Formal sanctions by the US, together with informal boycotts across the industry at large, have, for almost a year now, been squeezing the supply of Alrosa's good on which many manufacturers have relied. Sitharaman made an oblique reference to this when she said that "with the depletion in deposits of natural diamonds, the industry is moving towards lab-grown diamonds and it holds huge promise."
India would clearly benefit from access to the means of lab grown production on a significant scale, reducing its reliance on mined goods. Many factories - a fifth according to one estimate - have already been forced to switch from natural to lab grown manufacture because of rough shortages. The obvious next step would be to bring the actual production of lab growns in-house. India currently produces around 1.5m carats, a distant second place to China's 3m carats (Bain/AWDC figures for 2021). But last May, Colin Shah, then chairman of the Gems and Jewellery Export Council, said it had the potential to expand to 150m carats a year and achieve an export turnover of $5.14bn in "the near future". For context the lab grown market globally is set to reach almost $50bn by 2030 (Allied Market Research). The current value of the entire retail diamond jewelry market $85.5bn (Tacy's 2021 Diamond Pipeline).
This latest intervention by the Indian government, abolishing the seed tax, was met with cheers from the small lab grown sector, but jeers from the wider manufacturing community. It had lobbied in vain for tax breaks that would help them - an end to the online equalization levy, and a halving of the import duty on cut and polished diamonds. Any government has limited free money to hand out, so a decision to back lab growns over mined diamonds is a useful indication of where its priorities lie. Building a new lab grown production industry to feed into a ready-made manufacturing hub would cover all bases, from seeding to growing to cutting and polishing, setting the stones in jewelry and beyond.
Have a fabulous weekend.