While the government has taken significant steps to promote lab-grown diamonds (LGDs), the domestic industry is currently facing a substantial decline in prices due to overcapacity and continued imports, according to a report by the Global Trade Research Initiative (GTRI).
Despite India’s existing overcapacity, the country continues to import large quantities of lab-grown diamonds, an issue that warrants further investigation. To address these challenges, the report suggests that the government should implement measures such as issuing quality control orders (QCOs) and establishing clear, consistent regulations to standardise quality, certification, and market practices.
In the Union Budget for 2023-24, the government announced a five-year research grant for one of the Indian Institutes of Technology (IITs) to encourage indigenous production of LGD machinery, seeds and methodologies. Subsequently, IIT Madras was selected for the project, which includes the establishment of the India Centre for Lab-Grown Diamonds (InCent-LGD) at an estimated cost of ₹242.96 crores over five years.
However, the lab-grown diamond industry is grappling with a significant challenge due to imports and overcapacity, resulting in a steep 65% decline in prices over the past year, from ₹60,000 to ₹20,000 per carat. This sharp fall is undermining consumer confidence, and the report emphasises the need for urgent corrective measures to get this high-growth industry back on track.
Simultaneously, natural diamond prices have fallen by over 30% from their 2022 peak, primarily due to reduced demand from China and competition from lab-grown diamonds. Natural diamonds currently cost around ₹3.5 lakh per carat, and this price drop is making it difficult for manufacturers to repay loans taken for purchasing LGD-making machines, placing them under financial strain, the report added.
Lab-grown diamonds, as the name suggests, are created in laboratories by replicating the natural high-pressure, high-temperature conditions under which diamonds are formed in the Earth’s mantle.
Beyond the jewellery industry, lab-grown diamonds are used in computer chips, satellites, and 5G networks, as they can operate in extreme environments and have the potential to function at higher speeds while using less power than silicon-based chips. LGDs also have wide applications in the fields of defense, optics, thermal management, and the medical industry.
Globally, the lab-grown diamond market, which was valued at $1 billion in 2020, is expected to grow rapidly to $5 billion by 2025 and exceed $15 billion by 2035. However, in the last financial year, exports of lab-grown diamonds and other stones fell by 16%, dropping to $1.5 billion from $1.8 billion the previous year. In the April-May period of this year, exports stood at $241 million.