India’s diamond and jewellery industry faces a severe challenge in 2025 due to new U.S. tariffs. The United States has imposed import duties of 50% on cut and polished diamonds and 50-57% on studded and non-studded jewellery. These tariffs disrupt decades of stable trade and threaten the livelihoods of hundreds of thousands of workers. The sector is urging the Government of India for urgent intervention to mitigate the shock.
of U.S. Tariffs on Indian Exports
India exported diamonds worth ₹46,000 crore and studded gold jewellery worth ₹23,000 crore to the U.S. in 2024-25. The U.S. is the largest importer of these products from India. The tariffs have hit the sector hard. The Gems and Jewellery Export Promotion Council estimates that 1.7 lakh skilled workers could lose jobs. MSMEs, which make up 85% of exporters, are the most vulnerable. Key states affected include Gujarat, Rajasthan, and Maharashtra.
Economic Impact on MSMEs and Employment
The tariffs mainly affect MSMEs that cannot absorb such shocks easily. These small and medium enterprises have invested heavily over years in infrastructure and skills. Loss of the U.S. market will reduce orders drastically and strain their finances. Skilled workers face job insecurity as production slows or halts. The sector employs approximately 8.2 lakh skilled workers, denoting the social impact.
Policy Reliefs Sought by the Industry
The industry demands an extension of the export obligation period from 90 to 270 days. This allows more time to ship jewellery without incurring penalties. They also seek permission for reverse job work in Domestic Tariff Areas by Special Economic Zones (SEZs). This means SEZs can manufacture jewellery for domestic buyers, utilising idle capacity and retaining workers. Additionally, the sector wants SEZs to sell in the domestic market without paying import duty, improving competitiveness against local manufacturers.
Monetary and Worker Incentives Proposed
The sector requests monetary support such as interest subvention similar to COVID-19 relief. Temporary export subsidies for the U.S. market are also sought. Worker benefits include loan restructuring and inclusion in healthcare schemes to ease financial stress. Marketing support is vital to explore new export destinations beyond the U.S. Banking incentives, liquidity packages, and extended finance terms are other demands to improve cash flow.
Urgency and Scale of Government Support Needed
The tariffs threaten to undo decades of trade relations and growth. MSMEs, the backbone of the sector, are at risk of collapse without intervention. Large exporters may survive but smaller ones face extinction. The industry estimates a bailout package of around ₹500 crore for relief over three to six months. Immediate government action is critical to stabilise the sector and preserve millions of livelihoods.
Geographical Impact on Indian States
Gujarat, Rajasthan, and Maharashtra are the worst affected states. These regions host major diamond cutting and jewellery manufacturing hubs. The disruption impacts local economies and employment. Supporting these states is essential to maintain industry health and prevent wider economic fallout.
Role of SEZs in Mitigating Losses
SEZs play important role in exports but currently face restrictions on selling to the domestic market without paying duties. Allowing SEZs to sell domestically duty-free will help utilise existing infrastructure and reduce losses. Reverse job work will keep factories operational and workers employed during the downturn caused by tariffs.
Questions for UPSC:
- Critically discuss the impact of international trade tariffs on small and medium enterprises in India and suggest policy measures to mitigate such impacts.
- Examine the role of Special Economic Zones in India’s export economy and analyse how policy flexibility in SEZs can enhance economic resilience.
- Estimate the socio-economic consequences of job losses in the informal and skilled sectors due to sudden trade disruptions and discuss government intervention strategies.
- Point out the challenges faced by India’s gems and jewellery sector in global markets and analyse the importance of diversifying export destinations beyond traditional markets like the United States.
