The Surat Market Report: A VIRA Analysis of India's Diamond Hub

India's diamond industry stands at a critical juncture, with Surat serving as the epicenter of global diamond processing while facing unprecedented challenges. This comprehensive analysis reveals a market in transition, where traditional dominance is being tested by shifting global dynamics, supply chain disruptions, and evolving consumer preferences. The city that processes 90% of the world's diamonds has experienced a dramatic export decline from $25.48 billion in 2021-22 to $13.29 billion in 2024-25, representing the most significant contraction in two decades.

Market Infrastructure and Global Position

Surat's infrastructure represents the most sophisticated diamond processing ecosystem globally, anchored by the recently inaugurated Surat Diamond Bourse (SDB), the world's largest office building spanning 660,000 square meters. The facility houses 4,200 offices across nine interconnected towers, designed specifically to accommodate the diamond trading community's collaborative working culture. However, despite its architectural grandeur, the SDB has struggled with occupancy, with reports indicating only eight companies were fully operational as of late 2024, far below the projected 1,000 companies expected by Diwali 2024.

The city's processing capacity remains unmatched globally, with an estimated 15,000 diamond cutting units employing approximately 900,000 workers. This represents a significant contraction from pre-crisis levels of 18,000 units and 1.2 million workers, highlighting the industry's current challenges. Gujarat accounts for 72% of the world's processed diamonds, with 90% of this activity concentrated in and around Surat.

Trade Volume Analysis and Export Destinations

India's diamond export performance has experienced dramatic volatility over the past six years, with cut and polished diamond exports reaching a post-pandemic peak of $25.48 billion in 2021-22 before declining to $13.29 billion in 2024-25. This represents a 48% decline from peak levels and marks the lowest export value in two decades.

The geographic distribution of exports reveals heavy dependence on Western markets, with the United States commanding 36.3% market share ($7.61 billion) and Hong Kong accounting for 22.1% ($4.63 billion). Belgium, historically significant as a diamond trading center, represents 10.5% of exports, while the UAE maintains a 10.1% share. Notably, China's participation has virtually ceased, dropping from being the second-largest market to just 2.4% share due to consumer concerns about resale value and geopolitical tensions.

Import data indicates India processed 32,840 shipments of natural diamonds during October 2023 to September 2024, sourced from 1,297 foreign exporters. Russia, UAE, and Belgium remain the primary sources, though Russian diamond imports face increasing restrictions due to G7 sanctions implemented in 2024.

Product Segmentation and Market Preferences

Carat Size Distribution and Pricing

The Indian market demonstrates a strong preference for smaller diamonds, with stones in the 0.01-0.49 carat range commanding 45% market share despite their lower per-carat pricing of $1,500. Mid-range diamonds (0.50-0.99 carats) account for 30% of volume at $3,500 per carat, while the premium 1.00-1.49 carat segment represents 15% of the market with $5,000 per carat pricing.

Recent pricing trends show natural diamond values have surged 10% in early 2025, with good quality stones reaching ₹5 lakh ($5,850) per carat, up from ₹4.5 lakh in January. This recovery reflects improved demand in India's domestic market, which has grown to represent 11% of global natural diamond jewelry consumption, surpassing China to become the world's second-largest market.

Shape Processing Distribution

Round brilliant cuts dominate Surat's processing operations, accounting for 65% of total volume, reflecting global preferences for this classic cut. Princess cuts represent 8% of processing, followed by emerald cuts at 6% and cushion cuts at 5%. Fancy shapes including marquise, oval, pear, radiant, and heart cuts collectively account for the remaining 16% of production.

Market Crisis and Infrastructure Impact

The diamond industry has endured its worst recession in 50 years, with profound implications for Surat's economic ecosystem. Factory utilization has declined dramatically, with operations reduced from 12-hour to 6-hour shifts, and worker earnings falling from ₹25,000-30,000 monthly to ₹8,000-10,000. The crisis has tragically resulted in 45 worker suicides in 2024 alone, highlighting the human cost of the industry downturn.

Approximately 20-25% of diamond units remained closed following Diwali 2024, with an estimated 2,000 factories across Gujarat not reopening. The workforce reduction of 300,000 positions represents a 25% decline from peak employment levels. This contraction has cascaded beyond diamond processing, affecting Surat's real estate sector with construction project approvals declining from 724 in 2022-23 to 553 in 2024-25.

Competitive Dynamics: Natural vs. Lab-Grown Diamonds

The rise of lab-grown diamonds presents both challenges and opportunities for Surat's traditional processing industry. India has emerged as the world's largest exporter of lab-grown diamonds, with exports growing from $636 million in 2020-21 to $1.4 billion in 2023-24. However, 2024-25 saw a 9.64% decline to $1.26 billion, indicating market saturation in this segment.

Lab-grown diamond manufacturing units in Surat have expanded from 800 to 2,000 facilities, representing a 150% increase as traditional processors diversify their operations. These stones command approximately 10% of natural diamond values, creating volume opportunities but reduced revenue density.

Competition from established centers like Antwerp has intensified, with the Antwerp World Diamond Centre launching campaigns positioning synthetic diamonds as inferior products, selling lab-grown stones for five euros in public demonstrations. Despite this, Indian industry leaders maintain that both natural and synthetic diamonds serve distinct market segments.

Policy and Regulatory Environment

The Indian government has implemented several initiatives to support the diamond industry's competitiveness. The Diamond Imprest Authorization (DIA) Scheme, effective April 1, 2025, allows duty-free imports of natural cut and polished diamonds under 0.25 carats for qualified exporters. This addresses beneficiation policies in mining countries like Botswana and Namibia that require local processing.

Budget 2024 introduced safe harbor rates for foreign mining companies selling rough diamonds in Special Notified Zones, with a 4% minimum profit margin requirement. The elimination of the 2% equalization levy on rough diamond sales has enhanced India's competitiveness relative to Belgium and Dubai.

Future Outlook and Market Projections

Industry experts project cautious optimism for 2025, with expectations of market stabilization following inventory corrections and controlled production. India's domestic diamond jewelry market is forecast to reach $20-22 billion by 2032, potentially driving 2% compound annual growth in global diamond demand.

The Diamond Workers Union has begun demanding salary restoration and increment systems, indicating confidence in market recovery. De Beers India expects 15-20% consumption growth in 2025, primarily in smaller diamond categories where prices have already increased 6% in recent months.

Geopolitical factors including potential US tariffs of 10-27% on Indian diamond exports remain a significant risk, though the implementation has been delayed to allow for trade negotiations. The industry's ability to navigate these challenges while maintaining its global processing dominance will determine Surat's future trajectory.

Strategic Recommendations for Market Participants

Based on this comprehensive analysis, several strategic imperatives emerge for diamond industry stakeholders. Market participants should prioritize diversification across both natural and lab-grown segments while maintaining focus on smaller carat sizes that dominate volume. Investment in technology and automation can help maintain competitiveness amid rising labor costs and supply chain pressures.

The importance of developing alternative markets beyond the US and China cannot be overstated, given the concentration risk in current export destinations. Domestic market development presents significant opportunities, particularly in tier-2 and tier-3 cities where diamond penetration remains limited compared to traditional gold jewelry preferences.

Conclusion

Surat's diamond industry stands at an inflection point, where its foundational strengths in processing expertise and infrastructure scale must adapt to evolving market realities. While the current crisis has exposed vulnerabilities in market concentration and external dependencies, the underlying fundamentals of skilled craftsmanship, competitive costs, and processing efficiency remain intact. The industry's ability to embrace diversification, leverage policy support, and navigate geopolitical challenges will determine whether Surat maintains its position as the world's diamond capital or cedes ground to emerging competitors.

The path forward requires strategic patience, operational flexibility, and continued investment in both traditional processing excellence and emerging technologies. For VIRA Diamonds and other market participants, success will depend on understanding these dynamics and positioning portfolios to capture opportunities across the evolving diamond value chain.