India's gem and jewelry exports reached $27.72 billion in FY2026, driven by a strategic shift from simple gold consumption to high-value, tech-enabled manufacturing. While export volumes faced global macro pressure, growth in studded jewelry and market diversification into Australia highlight a structural change. Investors should focus on how companies manage rising import duties, working capital requirements, and competition from lab-grown diamonds.
India’s gem and jewelry industry is undergoing a fundamental change, moving away from its traditional role as a simple importer of gold bullion toward becoming a specialized global manufacturing hub. In the fiscal year 2026, the sector recorded $27.72 billion in total exports. While this figure reflects global economic headwinds and US tariff uncertainties, the real story for investors is the industry’s strategic pivot toward high-value, tech-enabled production to protect profit margins.
The sector currently processes approximately 90 percent of the world’s cut and polished diamonds, maintaining a dominant industrial scale. However, the focus is shifting toward value-added products rather than plain gold. Data for FY26 shows a 6.27 percent growth in studded gold jewelry exports, indicating that manufacturers are successfully moving up the value chain to capture better margins. By integrating technologies like 3D printing and blockchain for supply chain transparency, Indian firms are aiming to meet the strict provenance requirements of international luxury markets, effectively reducing their reliance on low-margin contract manufacturing.
Navigating Regulatory and Market Challenges
Despite the push toward high-value exports, the domestic environment remains challenging. The government’s decision to increase customs duty on gold imports to 15 percent in May 2026 has significantly raised the cost of raw materials. This duty hike, combined with high international gold prices, has suppressed domestic retail volume, forcing retailers to rely on old-gold exchanges and leaner inventory management to maintain profitability. Investors should note that companies with stronger balance sheets, which can manage the increased working capital burden caused by extended payment cycles and high inventory costs, are better positioned to navigate this period.
Furthermore, the sector is actively diversifying its export markets to offset risks. Exports to Australia, for instance, grew by 38.33 percent in FY26, helping to reduce dependency on traditional markets like the US and Hong Kong. However, the competitive landscape is also tightening. The rise of lab-grown diamonds (LGDs) continues to pressure margins for natural diamond processors, requiring traditional players to either pivot their offerings or improve operational efficiency.
The key monitorables for the sector in the coming quarters include the stability of the 15 percent import duty regime, the success of companies in shifting consumer preference toward studded and lighter jewelry, and their ability to sustain margins amid volatile raw material costs. Investors will also look for management commentary on how firms are balancing high working capital needs with the pursuit of new, high-growth export markets.