Rising exports, govt thrust add sparkle to lab-grown diamonds, but how bright can they shine?

Greenlab Diamonds garnered attention when Prime Minister Narendra Modi gifted the United States’ First Lady, Jill Biden, a 7.5-carat diamond grown artificially in the labs of the Surat-based diamond cultivator. 

The gesture by the PM also put the spotlight on lab-grown diamonds as a category, which is touted as a more environmentally-friendly and less expensive alternative to mined diamonds.  

While domestic demand for lab-grown diamonds is yet to take off in a big way, exports from India have grown significantly in recent times. 

According to a Gems and Jewellery Export Promotion Council (GJEPC) report, provisional gross export of polished lab-grown diamonds grew 37.31% (27.85% in US dollar terms) to Rs 13,466.42 crore (US$ 1679.98 million) for the period April 2022–March 2023, from Rs 9,807.56 crore ($1313.98 million) in the previous year. In contrast, polished mined diamond exports slumped 39% year on year to $1.32 billion in April this year. 

Shashikant Dalichand Shah, Chairperson, Lab Grown Diamond and Jewellery Promotion Council, attributes the slump to the fact that many precious diamond merchants have shifted to lab-grown diamonds because of the immense potential the category holds.

Growing exports

According to estimates, India contributes about 15% of the global production of lab-grown diamonds. 

There is a lot of potential for growth, and positioning homegrown lab diamonds in the global market provides tremendous opportunities for exporters, say industry players. 

Smit Patel, Director of Greenlab Diamonds, who is also the convener for lab-grown diamonds at GJEPC, says, when India imports rough diamonds and cuts and polishes them for exports, only 3–5% value is added. In contrast, the value addition rises to 17–18% in lab-grown diamonds, he says. 

Countries such as the United States, UAE, Hong Kong, and Singapore import lab-grown diamonds from India.

“About five-six years back, the Bharat Diamond Bourse, the world’s largest diamond trading hub, would not allow lab-grown diamond merchants to trade. But today, more than 50% of merchants present their deal in lab-grown diamonds,” says an industry source, who did not wish to be named. 

So, what brought about this change? 

“The rising export collections globally,” he says. 

“India is one of the fastest growing exporters of lab-grown diamonds in the world for chemical vapour deposition (Type IIa diamonds). This is despite the fact that Indian consumption is just 2-3%. Imagine when the demand from the homeland will increase, India may become the largest exporter,” he adds. 

India serves as a processing hub for lab-grown diamonds. As raw materials are available in the country, exporting lab-grown diamonds in large quantities is a feasible proposition. 

Ashish Pethe Waman, Partner at Mumbai-based Waman Hari Pethe Jewellers, which deals in gold and diamond jewellery, points out that even the machinery—reactors used for growing diamonds—is being made in India, leading to price competitiveness.

India currently exports 1 million carat of diamonds a month, says Patel (based on Greenlab’s internal research). 

According to Future Market Insights, the demand for lab-grown diamonds in India is set to grow at a CAGR of 14.8% and rising export is likely to propel this demand.

Domestic demand

While exports are rising, what about domestic demand for lab-grown diamonds? 

In addition to its lower carbon footprint, the significant price difference between lab-grown diamonds and mined diamonds can influence the decisions of domestic consumers in the days to come, say industry observers. 

The price of a diamond—whether natural or lab-grown—depends on several factors such as size, polish, and the 4Cs of colour, carat, clarity, and cut. 

Waman, who is also a co-opted member of the All India Gems and Jewellery Domestic Council, says, unlike earlier, there is now a clear and substantial price difference between lab-grown diamonds and natural diamonds. 

The price difference between the two types of diamonds can vary greatly—even up to 10 times. 

Patel cites an example of a customer who opted for a lab-grown diamond of a desired size and clarity at a cost of Rs 1 crore. A natural diamond of this kind would have cost around Rs 10 crore, he says. 

Currently, high net-worth individuals in India are the primary buyers of lab-grown diamonds. Going forward, the acceptance of lab-grown diamonds will grow across consumer segments, believe industry players.

Lisa Mukhedkar, Founder of Bengaluru-based diamond jewellery brand Aukera, which deals with cultured diamonds, says lab-grown diamonds have been existing in India for decades. However, there was no clarity, awareness, or detection mechanism to tell the difference between lab-grown diamonds and mined diamonds. 

In 2018, the Federal Trade Commission in the United States expanded its definition of diamonds to include those grown in a laboratory. “This is when things took a turn and we are seeing the impact now,” says Mukhedkar. 

“There was always a hush-hush for lab-grown diamonds but the PM’s move highlights the growing recognition and acceptance of lab-grown diamonds at the highest levels and it is just the beginning,” she adds. 

The government’s thrust on lab-grown diamonds is expected to accelerate consumer awareness and acceptance and the overall market growth. 

During Budget 2023, Finance Minister Nirmala Sitharaman had announced the reduction of customs duty on diamond seeds used in the manufacturing of lab-grown diamonds. Additionally, she had also announced a grant to IITs to facilitate the growth of these cultured diamonds in India.

Can lab-grown diamonds outshine natural diamonds?

In a market that’s driven by choice and variety, there is space for both natural diamonds and cultured ones to co-exist, concur industry experts. 

“The market for lab-grown diamonds and natural diamonds is separate—similar to real pearls and cultured pearls. Different marketing strategies will be employed to avoid customer confusion between lab-grown and natural diamonds. Both of them will coexist in the market,” emphasises Waman. 

According to him, lab-grown diamonds offer an affordable choice to consumers and provide manufacturers with the opportunity to experiment with designs at lower price points. 

Patel shares that Greenlab Diamonds, which has been in the business for 60 years, had adapted to the emerging trend five years ago. It now exclusively produces lab-grown diamonds. 

He cautions that newcomers in the lab-grown diamond industry may not have the advantage of being early adopters and will have to start from scratch, considering various factors such as stock value and import regulations. Nonetheless, he believes the future of lab-grown diamonds is very promising.

Mukhedkar disagrees with the notion that lab-grown diamonds will flood the market, leading to an eventual saturation. She believes these diamonds will retain their preciousness and exclusivity.  

“The energy, cost, and raw materials required to create lab-grown diamonds are still quite expensive, ensuring that the product maintains its value,” she says. 

Mukhedkar also emphasises that, despite the presence of numerous factories producing lab-grown diamonds in places like Surat, only a select few will truly excel in producing high-quality lab-grown diamonds.