Surat in Gujarat has emerged as a major global hub for manufacturing and exports of lab-grown diamonds over the last 5 years. Known earlier as the diamond cutting and polishing center, Surat now dominates production of the cheaper lab-grown diamonds using advanced technology. Share of Surat is over 35% of the global lab-grown diamonds market as per industry estimates. Exports crossed $2 billion in 2023.
Surat’s Competitive Advantages
- Presence of diamond cutting and polishing units facilitated easy transition to lab-grown production requiring similar domain expertise.
- Lower production costs compared to labs in China/US – saves over 25% costs. Abundant skilled labor supports mass production of small diamonds.
- Goods and Services Tax (GST) concessions in Surat SEZ for rough lab diamonds boosts exports price competitiveness.
Production Growth Trends
Surat’s Lab-Grown Diamond Production and Exports
| Year | Carats Produced (million) | Export Value (USD billion) |
| 2018 | 1.2 | 0.38 |
| 2021 | 4 | 1.05 |
| 2022 | 6 | 1.75 |
| 2023 | 7.5 | 2.1 |
Key Growth Drivers
Demand Side Factors
Increasing consumer acceptance globally driven by:
- ~30% cheaper price tags than natural diamonds
- Better technological processes enhancing shine and quality
Supply Side Factors
- Government incentives for technology and infrastructure upgrades – subsidy up to 25% for lab equipment
- Strengthening ancillary ecosystem – machine makers, testing labs, diamond powder material suppliers etc
SWOT Analysis
SWOT Analysis of Surat’s Lab-Grown Diamond Industry
| Strengths | Weaknesses | Opportunities | Threats |
| Early mover advantage and strong initial growth | Overcapacity building up, utilization rates fell below 50% by end 2022 | Rising export demand from Europe, Middle East, South East Asia – diversify from relying only on US | Chinese companies scaling up production rapidly may lead to glut situation |
| Cost competitiveness | R&D investments limited compared to overseas labs | Scope for branding and product innovation instead of competing only on costs | Consumer perceptions still inhibited in India about being “inauthentic” compared to natural diamonds |
| Complete ecosystem exists locally – raw material suppliers to final polishing and testing | Capital costs are high for technology upgrades for small units | Applications in electronics/industrial uses can be tapped beyond traditional jewelry industry | Recession concerns in US and Europe can dampen demand in key export markets |
Key Challenges
Managing cycles of overcapacity
Mitigation strategies: Attempt demand consolidation for small firms via government supported export houses
Need for differentiation beyond pricing
Approaches: Drive product innovation in cuts/designs and push for branding based on reliable quality
Raw material supply security concerns
Response plan: Facilitate joint ventures of midstream suppliers with global diamond chemical companies to indigenize over long term
Boosting Competitiveness with Policy Reforms
Proposed Policy Changes and Targets
| Policy Reforms | Expected Outcomes | Achievement Timelines |
| Concessional import duties on second-hand CVD machine imports | Reduce capital costs for MSMEs to upgrade lab infrastructure | Duties cut by at least half within one year |
| Incentives for exports to new overseas markets like Indonesia, South Africa | Share of top 5 export destinations to fall below 75% from 95% now indicating diversification | 3 years |
| Cluster development model with common testing facilities | Double the number of testing labs and reduce costs | 5 testing hubs by 2027 |
Recent Policy Updates
- In the 2024 budget, import duty was reduced to 2.5% from 7.5% on second-hand capital equipment for lab-grown diamond manufacturing. This will enable many small players to add latest machinery for further boosting productivity and quality.
- The Gem Jewellery Export Promotion Council (GJEPC) signed MoUs with trade bodies in Belgium, UAE and Hong Kong in early 2024 for marketing tie-ups. This aims to promote branded Indian lab-grown diamonds in these markets.
Geopolitical Dynamics
- Surat based manufacturers have gained market share in global exports due to operational challenges faced by producers in Chinese cities during the COVID pandemic delays. This geo-political factor allowed acceleration of Surat’s dominance.
- Russia’s rough diamond pipeline issues after the Ukraine war has indirectly benefited the lab-grown industry. Market showed more willingness to experiment with lab varieties as substitute for diamond jewelry purposes.
The lab-grown diamond manufacturing ecosystem in Surat holds strong promise as a champion sector for exports and job creation for India. Addressing cyclical gluts with prudent demand analysis, encouraging sustainable technologies and innovation focus are imperatives for lasting global competitiveness. With responsive policy reforms, a target for Surat to capture over 50% value share of this industry worldwide seems achievable over the next decade.
Last Modified: February 27, 2024