The diamond-cutting and polishing industry in Surat, India’s largest diamond hub, has announced an unprecedented month-long shutdown until November 30, a significant extension from its usual two-week Diwali closure.
The decision comes in response to diminished demand for natural diamonds from the United States and China—historically the sector’s two most significant markets.
The industry slowdown is impacting roughly 5,000 diamond processing units in the city and nearly 800,000 workers employed across these facilities.
Weakening Global Demand and Geopolitical Challenges
Surat’s diamond sector, which processes nine out of every ten diamonds globally, has struggled with ongoing challenges in its key export markets. The United States and China have traditionally driven demand for natural diamonds, but both regions have seen a downturn in their purchasing. For the U.S., slow economic recovery has tempered demand, while in China, consumer sentiment has shifted toward gold, a trend accelerated by the COVID-19 pandemic when Chinese consumers found gold’s resale value more reliable than that of diamonds. Additionally, sanctions imposed by G7 countries on diamonds sourced from Russia, a significant supply route, have further complicated operations.
Job Security Concerns Heightened
The extended Diwali break has raised concerns about job security among Surat’s diamond workers. Industry reports indicate that some factories may not resume operations at full capacity after the shutdown, prompting fears of potential layoffs. According to Bhavesh Tank, vice-president of the Diamond Workers Union in Gujarat, “There have been job losses and wage cuts over the last few months. The month-long Diwali holiday, which is an unusual phenomenon in Surat, has raised concerns among the workers as factory owners have informed us that they will call them once the holiday ends. This is a hint that there may be job cuts when they reopen. This did not happen even during the 2008-2009 recession.”
Economic Impact and Industry Response
The shutdown reflects a sharp decline in India’s diamond export performance, with cut and polished diamond exports falling by 20.6% in the first half of FY25, dropping from $8.7 billion to $6.9 billion year-over-year. Despite this, industry leaders remain cautiously optimistic about recovery. Kirit Bhansali, vice-chairman of the Gem & Jewellery Export Promotion Council (GJEPC), expressed hopes that the new U.S. president will support economic improvement, which could spur demand. “If that happens, then the first quarter of 2025 will show exports to the U.S. moving up,” Bhansali stated.
Competing Pressures from Lab-Grown Diamonds and Consumer Trends
The growing popularity of lab-grown diamonds (LGDs) in the U.S. market is also placing pressure on the natural diamond sector. While Bhansali notes that LGDs are considered a distinct category and do not directly compete with natural diamonds, their rising popularity underscores changing consumer preferences, particularly among younger buyers who are often drawn to more affordable and sustainable options.
Meanwhile, in China, the GJEPC, alongside diamond retailer Chow Tai Fook and De Beers, has announced a promotional campaign aimed at reinvigorating interest in natural diamonds. This campaign seeks to address Chinese consumers’ preference for gold over diamonds, a shift rooted in the perception of gold as a more fungible asset. “The campaign will begin next week, and we are hopeful that the situation in China will improve from the first quarter of 2025,” Bhansali added.
