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1Trade Watch Oct-Dec (Q3) FY 2025-26
Oct-Dec (Q3) FY 2025-26
QUARTERLY
TRADE WATCH
THEMATIC ANALYSIS:
GEMS AND JEWELLERY

TRADE WATCH QUARTERLY, Quarterly Report for the FY 2025-26
Copyright@ NITI Aayog, 2026
Published: April, 2026
NITI Aayog
Government of India
Sansad Marg, New Delhi-110001, India

Oct-Dec (Q3) FY 2025-26
TRADE WATCH
QUARTERLY

F O R E W O R D

Global trade in 2025 has continued to expand, even as the external environment remains
uncertain and uneven. While growth has been uneven across regions, overall trade activity has held up,
supported by continued demand and gradual adjustments in supply chains. At the same time, services
trade has maintained a stronger momentum, particularly in digitally delivered segments, indicating a
gradual shift in the composition of global trade. These trends point to a trade landscape that is adapting,
rather than slowing, under evolving global conditions.
2. Against this backdrop, India’s trade performance reflects steady progress. During April–
December 2025, India’s total merchandise and services trade expanded, with exports growing
marginally faster than imports. While merchandise trade continues to be shaped by global demand
conditions and domestic consumption, the sustained expansion in services exports has helped offset
pressures from the merchandise deficit and supported overall external stability. Alongside traditional
partners in North America and Europe, there is increasing momentum in regions such as Northeast Asia
and Africa, indicating a more dispersed export footprint. This is also reflected in the declining trend in
the Herfindahl-Hirschman Index (HHI) for exports, pointing to a steady improvement in diversification
across both markets and products.
3. The thematic focus of this edition on the gems and jewellery sector highlights an important
segment of India’s export basket. India continues to hold a strong position in diamond processing,
supported by established clusters and a large skilled workforce. At the same time, the sector remains
dependent on imported raw materials and concentrated in a limited set of markets. Ongoing shifts,
including the rise of lab-grown diamonds and changing consumer preferences, are influencing both
demand patterns and the structure of global trade in this segment. Sustaining India’s trade momentum
will require continued efforts to enhance competitiveness and value addition. Improving logistics
efficiency, reducing transaction costs, and strengthening integration into global value chains will be
important. At the same time, expanding capabilities in higher-value manufacturing exports will remain
central to ensuring a balanced and resilient trade framework.
4. I commend the team for their rigorous analysis and continued efforts in delivering timely and
insightful assessments. I am confident that this edition will provide useful inputs for policy discussions
and contribute to strengthening India’s trade performance over the medium term.

Dated: 17
th
April, 2026

iTrade Watch Oct-Dec (Q3) FY 2025-26
ADVISORY BOARD
S. No.Board Member Affiliation
1 Harsha Vardhana Singh Former Deputy Director, WTO
2 Santosh Kumar Sarangi
Former Additional Secretary & Director
General, DGFT
3 Pravin Krishna Professor, Johns Hopkins University
4 Rupa Chanda Director, UNESCAP
5 Deepak Mishra Director and Chief Executive, ICRIER
6 Rakesh Mohan Joshi Professor and Vice Chancellor, IIFT, Delhi
7 Arpita Mukherjee Professor, ICRIER
8 James J. Nedumpara
Professor and Head, Centre for Trade and
Investment Law (CTIL)
9 Pritam Banerjee
Professor and Head, Centre for WTO
Studies
10 C Veeramani Director, Centre for Development Studies
11 Sanjay Kathuria Visiting Senior Fellow, CSEP
12 Biswajit Nag Professor, IIFT
13 Debashis Chakraborty Professor, IIFT, Kolkata
14 Pranjul Bhandari Chief India Economist, HSBC

iiTrade Watch Oct-Dec (Q3) FY 2025-26
EXECUTIVE SUMMARY
Global trade remained resilient in 2025 despite persistent uncertainty, with goods
trade recording around 8% year-on-year growth in Q3 FY 2025-26 (October–
December), while services continued to expand at a faster pace, led by digitally
delivered segments. Against this backdrop, India’s total merchandise and services
trade grew by 5.3% y-o-y during April–December 2025, reaching approximately $1.37
trillion with exports growth of 5.4%, slightly outpacing import growth of 5.2%. This
was further supported by a robust y-o-y increase of 12.8% recorded in the services
surplus.
India’s merchandise export basket remains diversified led by electrical machinery,
mineral fuels, nuclear reactors, gems and jewellery and iron and steel, with growth
driven by smartphones, engineering goods, and vehicle exports. On the import front,
the basket continues to be dominated by mineral fuels, gold, electrical machinery,
and capital goods. Geographically, while traditional markets such as North America,
particularly the US and Europe, led by the Netherlands, continued to anchor exports,
emerging regions like Northeast Asia and East Africa are gaining importance,
indicating gradual diversification. The share of trade with FTA partners has increased
sixfold, rising from 4.6% in 2006 to 28.8% in 2024, with the majority of the FTAs with
Asian partners indicating growing integration in the regional trade.
The analysis of trade concentration using the Herfindahl-Hirschman Index (HHI)
further reinforces this divergence. India’s exports have become increasingly
diversified over time, with declining concentration in both products and regions. In
contrast, imports remain relatively concentrated, particularly in mineral fuels and
electronics. This highlights the need for strategic diversification of import sources
and strengthening domestic production capabilities in critical sectors.
The thematic analysis of the Gems and Jewellery sector underscores both India’s
strengths and structural challenges. The sector commands a global market size of
$378.1 bn excluding raw gold (HS 7108) in 2024. India’s exports are valued at $29.5 bn,
translating to a share of 7.8% in 2024, led by precious metal jewellery and unworked
and unmounted diamonds. Precious metal jewellery and diamonds together
account for 54.8% of global demand ($207.3 billion), with India exporting $26.7 billion,
reflecting a strong 13% share. In contrast, across the remaining products (46.8% of
demand, $170.8 billion), India’s exports stand at $2.8 billion, translating to a much
lower 2% share, highlighting significant export concentration.
Globally, the share of six of the ten HS-4-level products in this chapter has declined in
world demand in 2024 as compared to their share in 2015, while three have recorded
only marginal growth of less than 1%. Raw gold stands as an exception, registering
a 14.6% increase in the same period. India’s share has remained largely stagnant
or declined across most of these products. Platinum, scrap and waste of precious
metals, and silver are among the emerging segments recording a strong CAGR of
6-7% and collectively represent a world market size of $103 bn.
The sector remains an important contributor to the Indian economy, with a share of
approximately 2.2% of total manufacturing output and 7% of GDP and employs about
50 lakh workers as of 2022–23. For India, gems and jewellery (HS 71) which includes
raw gold is the third largest import item, dominated by raw materials, comprising

iiiTrade Watch Oct-Dec (Q3) FY 2025-26
unwrought or semi-processed precious metals, particularly gold, whereas it is the
fourth largest in the export basket, concentrated by cut and polished diamonds
and gold jewellery. The export market for the chapter is also geographically
concentrated, with the US, UAE, and Hong Kong together accounting for nearly 70–
75% of total exports, which makes it pertinent to study given the current geopolitical
environment.
India’s Gems and Jewellery sector (HS 71) shows increasing export diversification but
declining alignment with global demand, as reflected in the Trade Complementarity
Index, which fell from 53.8 in 2001 to 25.1 in 2024. While exports have become more
diversified, with a reduced dominance of diamonds and a rising share of jewellery,
import dependence remains concentrated, particularly on gold. Overall, the sector
needs further reorientation to better align with evolving global demand and
strengthen competitiveness.
Interestingly, the leading exporters globally, such as Switzerland and Hong Kong, do
not necessarily possess the raw materials required in the sector but have conducive
policies related to financial trading, refining capabilities, and market access that
have worked favourably over the years in strengthening their positions. The report
also explores the policies that have contributed to the flourishing of these industries.
In India, the industry faces challenges related to access to finance, the availability
of granular data on value addition and employment, and limited capabilities in
designing low-carat jewellery. These constraints have, in turn, weighed on its export
performance. Given India’s comparative advantage in diamond and gold jewellery, the
report presents a snapshot of its current position, along with a comparative analysis
of leading domestic and international exporters, and outlines policy suggestions to
strengthen its global standing in the sector.

ivTrade Watch Oct-Dec (Q3) FY 2025-26
HIGHLIGHTS
1. India’s total merchandise and services trade grew steadily during April–December
FY 2025-26, rising by about 5.3% year-on-year to $1.37 trillion, with a strong and
rising services surplus helping offset the elevated merchandise trade deficit and
stabilising the overall external balance.
2. Merchandise exports during Q3 FY’26 grew by 1.6% y-o-y to $110.48 bn and
imports rose by 7.9% to $202.33 bn, services exports increased by 7.8% to $111.2 bn
and imports rose by 2.8% to $53.7 bn.
3. Export composition remained unchanged from Q2 FY’26. Import composition
was stable despite a persistent surge in fertiliser imports. Directionally, Spain
replaced Singapore as the tenth leading export destination and Japan replaced
Indonesia as the tenth largest import source.
4. Regionally, Northeast Asia recorded strong export growth of 33.5% during the
quarter, driven by higher shipments to China and Hong Kong. For imports, West
Africa rose sharply by 59.8% y-o-y, driven by natural pearls, fertilisers and cotton
during the quarter.
5. Herfindahl-Hirschman Index (HHI) trends indicate India’s exports have become
more geographically and product-wise diversified, with Asia’s share moderating
from ~49% to ~40% alongside rising shares of Europe (~22%) and America (over
25%) during 2017-18 to 2024-25.
6. India’s Trade Complementarity Index (TCI) with the world has improved at the
HS-2 level driven by sectors like engineering goods, petroleum, chemicals, and
electronics but remains stable at the HS-6 level, indicating selective rather than
broad-based alignment, with persistent gaps in high-value and technology-
intensive segments.
7. FTA partners have emerged as a key driver of India’s trade integration, with
their share in total trade rising sharply from 4.6% in 2006 to 28.8% in 2024,
reflecting deeper economic linkages and expanding market access under trade
agreements.
8. India continues to be a significant global player in the gems and jewellery sector
(HS 71), especially in worked diamonds. Although including raw gold makes this
category appear as the fifth-largest globally traded merchandise segment, with
demand reaching $1.05 trillion, excluding raw gold provides a more accurate
representation of the sector’s core trade, with global demand estimated at $378
billion.
9. India’s exports in 2024 (excluding raw gold) stand at $29.5 billion, accounting for
a 7.8% share of the $378 billion global gems and jewellery market.
10. Diamonds (HS 7102) and gold jewellery (HS 7113) constitute the core of India’s
export basket, comprising over half of the overall world demand. In diamonds,
India exhibits a strong RCA (Revealed Comparative Advantage) of 5.77, accounting
for 16.9% ($12.3 bn) of global demand.
11. India’s share in the global gems and jewellery exports (HS 71, including raw
gold) declined from 6.1% in 2015 to 2.9% in 2024, even as global demand became
increasingly concentrated in raw gold and weakened in segments such as
unworked and unmounted diamonds.

vTrade Watch Oct-Dec (Q3) FY 2025-26
12. India’s gems and jewellery trade (including raw gold) is highly concentrated, with
the US, UAE and Hong Kong accounting for about 73% of India’s exports, and
UAE, Switzerland and Hong Kong supply over 60% of imports.
13. Diamond and gold jewellery segments are being reshaped by evolving
demographic and behavioural trends, with rising global preference for lower-
carat gold presenting an opportunity for India to diversify its market focus while
continuing to cater effectively to domestic demand.
14. The major challenges for exports are on account of seasonality of export demand
from major markets, credit gap due to lack of trust from financial institutions,
lack of integrated and granular data for the sector in national accounting and
limited adaptability towards foreign market appetite for low-carat jewellery.
15. Strengthening the sector requires increased capacity utilisation of specialised
clusters, targeted branding and promotion of GI products, inclusion of
consignment exports for FTA duty benefits, improved data reporting, enhanced
access to finance through credit guarantees and interest subvention, and the
establishment of centres of excellence for skill development to support design,
innovation, and value addition.

viTrade Watch Oct-Dec (Q3) FY 2025-26
Contents
A. India’s Trade Analysis ��1
1. Merchandise and Services Analysis ��2
2. Evolving Merchandise Deficit and Services Surplus Dynamics ��3
3. Compositional Analysis ��5
4. Trade Direction ��7
5. Regional Analysis ��8
6. Herfindahl-Hirschman Index (HHI) Analysis of India’s Trade Concentration ��10
7. Growing Role of FTA Partners in India’s Merchandise Trade ��13
B. Thematic Analysis: Gems and Jewellery ��17
1. Overview ��18
2. Mapping the Global Trade Profile ��19
3. Mapping India’s Trade Profile ��24
4. Change in share in the Gems and Jewellery Exports over the years (2015-24) ��26
5. Mapping Global Demand and India’s Export Footprin in Gems and Jewellery ��27
6. Assessing Foreign Investment Trends in Gems and Jewellery ��29
7. Lab-Grown Diamonds (LGDs): Emerging Segment within
India’s Gems & Jewellery Sector ��32
8. Industry Insights on Key Constraints Affecting India’s Gems
and Jewellery Trade Performance ��35
9. Way Forward ��37
C. Policy and Geopolitical Highlights ��39
1. Global Trade–Related Policy Updates ��40
2. India’s Trade Policy Developments ��40
3. Commodity Price Trends ��41

1Trade Watch Oct-Dec (Q3) FY 2025-26
A.
INDIA’S TRADE
ANALYSIS

2Trade Watch Oct-Dec (Q3) FY 2025-26
A. India’s Trade Analysis
Global trade in the year 2025 demonstrated resilience despite an uncertain
macroeconomic environment, and global goods trade recorded a y-o-y growth
of 8% in Q3 FY 2025-26 (October–December)
1
. At the same time, trade in services
maintained strong momentum, driven in particular by the continued expansion
of digitally delivered services, highlighting the growing importance of the digital
economy in sustaining global trade growth.
India’s merchandise and services trade performance recorded a 5.3% y-o-y increase
during April–December 2025, supported by steady growth in both exports and
imports. During this period, total trade reached $1373 bn. Exports witnessed a growth
of 5.4%, reaching $640.30 bn, while imports grew by 5.2%, amounting to $732.57 bn
between April–December 2025 (Fig 1).
Fig 1: Total Trade performance between Apr-Dec’25
5.3%
5.4%
5.2%
4.1%
0%
1%
2%
3%
4%
5%
6%
-400
0
400
800
1200
1600
Total TradeExport ImportTrade Balance
$Billion
Apr - Dec 2024Apr - Dec 2025Change % (RHS)
Source: Department of Commerce, MoC&I, GOI
1. Merchandise and Services Analysis
In December 2025, merchandise exports recorded a moderate increase of 1.8%,
reaching $38.47 bn, while imports witnessed a stronger growth of 8.8%, reaching
$63.55 bn (Fig 2). India’s total trade (merchandise and services) in Q3 FY 2025-26
grew by 5.6% y-o-y. In Q3 FY 2025-26, merchandise exports increased by 1.6% y-o-y to
$110.48 bn, while imports rose by 7.9% reaching $202.33 bn (Fig 3). This resulted in a
net merchandise trade deficit of $91.85 bn for the quarter.
1 https://documents1.worldbank.org/curated/en/099714403232699040/pdf/IDU-81203430-2cd3-4a58-bd54-af754b57fba1.pdf

3Trade Watch Oct-Dec (Q3) FY 2025-26
Fig 2: Merchandise Trade (Monthly) Fig 3: Merchandise Trade (Quarterly) 1.8%
8.8%
21.6%
-10%
-4%
2%
8%
14%
20%
26%
-40
-20
0
20
40
60
80
Dec (EX) Dec (IM) Trade Balance
$Billion
FY 2025 FY 2026 y-o-y % (RHS)
1.6%
7.9%
16.6%
-10%
-4%
2%
8%
14%
20%
-200
-100
0
100
200
300
Q3 (EX) Q3 (IM)Trade Balance$Billion
FY 2025FY 2026y-o-y % (RHS)
Source: Department of Commerce, MoC&I, GOI
India’s services exports for December 2025 stood at $41.8 bn, registering a strong
y-o-y growth of 13.3%, while services imports increased by 7.4% reaching ~$19.1 bn
(Fig 4). During Q3 FY 2025-26, services exports witnessed a robust annual expansion
of 7.8%, reaching $111.2 bn and services imports rose moderately by 2.8% to $53.7 bn
during the same period, resulting in a net services trade surplus of $57.5 bn (Fig 5).
The combined balance of trade in goods and services recorded a net deficit of $34.35
bn for this quarter.
Fig 4: Services Trade (Monthly) Fig 5: Services Trade (Quarterly) 13.3%
7.4%
18.8%
0%
4%
8%
12%
16%
20%
0
10
20
30
40
50
Dec (EX) Dec (IM)Trade Balance
$Billion
FY 2025FY 2026 y-o-y % (RHS)
7.8%
2.8%
12.8%
0%
4%
8%
12%
16%
0
20
40
60
80
100
120
Q3 (EX) Q3 (IM)Trade Balance
$Billion
FY 2025FY 2026 y-o-y % (RHS)
Source: Department of Commerce, MoC&I, GOI
2. Evolving Merchandise Deficit and Services Surplus Dynamics
The evolving composition of India’s external trade reflects a gradual but clear shift
towards a more services-driven balance, with both the merchandise deficit and
the services surplus increasingly viewed relative to total trade (merchandise plus
services). This broader lens provides a more integrated assessment of external sector
dynamics, capturing the relative contribution of goods and services in shaping
overall trade outcomes and macroeconomic stability.
At a granular level, monthly trends during FY2025–26 (April–December) reinforce
the pattern of gradual rebalancing. The merchandise trade deficit, after a temporary
spike to nearly $42.0 bn in October, moderated to around $25.1 bn by December,
indicating a correction following short-term pressures. Meanwhile, the services
surplus maintained a steady upward trajectory, increasing from $15.9 bn in April
to $22.7 bn in December. This consistent expansion highlights the resilience and
growing global competitiveness of India’s services exports, particularly in IT and
professional services, and their increasingly central role in stabilising the external
account.

4Trade Watch Oct-Dec (Q3) FY 2025-26
Fig 6: Quarterly Merchandise Deficit and Services Surplus Trend (Q1 FY20-Q3 FY26)
16%
5%
19%
7%
11%
12%
9.8%
7.2%
0%
5%
10%
15%
20%
25%
Q1 FY20
Q3 FY20
Q1 FY21
Q3 FY21
Q1 FY22
Q3 FY22
Q1 FY23
Q3 FY23
Q1 FY24
Q3 FY24
Q1 FY25
Q3 FY25
Q1 FY26
Q3 FY26
Merchandise Deficit % of Total TradeServices Surplus % Total Trade Trade Balance % of Total Trade
Source: Department of Commerce, MoC&I, GOI
A quarterly analysis based on this combined measure highlights both cyclical
movements and structural shifts. The merchandise trade deficit, as a share of total
trade, declined sharply from around 16% in Q1 FY2020 to about 5% in Q1 FY2021
amid pandemic-induced import compression, before rising again as the economy
recovered. Since then, it has fluctuated within a moderate range, reaching around
19% in Q3 FY2026 after moving from about 16% in Q1 FY2026. This indicates a gradual
re-emergence of deficit pressures in line with increasing domestic demand. In
contrast, the services surplus, when measured as a share of total trade, has exhibited
a steady upward trajectory, from about 6–7% in FY2020 to nearly 12% by Q3 FY2026,
with relatively lower volatility (Fig 6).
The widening gap between the two, though still moderate in magnitude, underscores
a structural trend wherein services are playing an increasingly important role in
offsetting merchandise trade imbalances, even as goods trade remains sensitive to
cyclical and external factors. The persistence of this divergence between goods and
services trade is rooted in structural factors. India’s increasing domestic demand
continues to drive imports, which, while widening the merchandise deficit, also
signals underlying economic strength rather than vulnerability. At the same time,
India’s global competitiveness in services, particularly in IT, business, and professional
services, has ensured sustained export growth. Recent data indicate that services
exports have continued to grow at a healthy pace, reinforcing their role as a key
stabiliser of the current account. This reflects a deeper structural shift in India’s
trade composition, where services are increasingly compensating for deficits in
merchandise trade.
Overall, the evolving trend underscores a positive narrative for India’s external sector.
As India continues to diversify its export base and enhance competitiveness in both
manufacturing and high-value services, this dual trade structure is likely to provide
greater resilience against global uncertainties. In this context, the trend reaffirms
that while merchandise deficits remain an inherent feature of a fast-growing,
over-populated economy, the sustained strength of services exports is effectively
anchoring macroeconomic stability.

5Trade Watch Oct-Dec (Q3) FY 2025-26
3. Compositional Analysis
3.1 Merchandise Exports
In Q3 FY 2025-26, the leading
2
exports amounted to $68.7 bn marking a y-o-y
increase of 4%. The leading commodities continued to be electrical machinery and
parts (13.1% share), mineral and related fuels (11%), and nuclear reactors (8.3%). For Q3
FY 2025-26 y-o-y growth was recorded for all the top ten commodities with electrical
machinery, iron and steel and vehicles recording strong y-o-y growth of 21.0%, 15.1%
and 14.2% respectively (Fig 7).
Exports of electrical machinery recorded a sharp increase, supported by the
sustained expansion in smartphone shipments. The surge in iron and steel exports,
especially ferro-silico-manganese and flat-rolled products in coils (HS 720250 and
720838 respectively) was driven by European buyers increasing purchases to build
inventories ahead of the introduction of a new carbon tax
3
. At the same time,
merchandise exports from the automobile sector strengthened, driven by increased
shipments of passenger vehicles.
Under nuclear reactors, boilers & parts thereof, exports recorded strong growth of
12.4%, driven by higher demand for watertube boilers with a steam production (HS
840211) and linear acting (cylinders), hydraulic power engines and motors (HS 841221).
Fig 7: Composition and Growth of Exports
13.1%(21.0%)
11.0%(-8.9%)
8.3%(12.4%)
6.4%(-5.8%)
5.8%(14.2%)
5.7%(8.5%)
4.4%(-1.2%)
2.6%(-23.8%)
2.5%(15.1%)
2.4%(0.1%)
0% 2% 4% 6% 8% 10% 12% 14% 16%
Electrical machinery & parts
Mineral & related fuels
Nuclear reactors, boilers & parts thereof
Natural, cultured pearls & precious stones
Vehicles other than railways & parts
Pharmaceutical products
Organic chemicals
Cereals
Iron and steel
Articles of iron or steel
Note: Y-o-y growth of the commodity in India’s export for this quarter is mentioned in parenthesis
Source: Department of Commerce, MoC&I, GOI
2 Leading commodities are the top ten commodities with the highest value share in exports in the current quarter.
3 https://www.thehindu.com/business/Industry/india-will-support-steel-exports-hit-by-europes-carbon-tax-federal-secre -
tary-says/article70612415.ece

6Trade Watch Oct-Dec (Q3) FY 2025-26
3.2 Merchandise Imports
In Q3 FY 2025-26, the leading
4
imports amounted to $158.7 bn marking a y-o-y increase
of 7.4%. The imports continue to be led by mineral fuels (24.9% share), natural and
cultured pearls (16.7%), electrical machinery (12.75%), and nuclear reactors (9.3%). (Fig 8)
In growth terms, fertilisers recorded a sharp y-o-y increase of 70.5% in Q3 FY 2025-
26 over Q3 FY25, rising from $3.3 bn to $5.7 bn, due to increasing domestic demand.
This growth was primarily driven by higher imports of DAP and urea. Imports of
natural and cultured pearls also increased by 30.1% y-o-y, driven by festive demand
and restocking amid strong demand for luxury goods. Electrical machinery recorded
a 15.7% increase, led by rising imports of processors and controllers, smartphone
components, and electronic integrated circuits.
In contrast, four product categories within the top ten imports for the quarter
registered contractions. The steepest decline was observed in iron and steel, which
fell by 11.1%, while the mildest contraction was recorded in organic chemicals at 2.9% .
Fig 8: Composition and Growth of Imports24.9%(-9.0%)
16.7%(30.1%)
12.7%(15.7%)
9.3%(16.5%)
3.1%(-2.9%)
2.8%(70.5%)
2.7%(-3.0%)
2.4%(1.3%)
1.9%(-11.1%)
1.9%(11.3%)
0% 5% 10% 15% 20% 25% 30% 35%
Mineral & related fuels
Natural, cultured pearls & precious stones
Electrical machinery & parts
Nuclear reactors, boilers & parts thereof
Organic chemicals
Fertilisers
Plastic & articles thereof
Animal or Vegetable fats and oils
Iron and steel
Optical/ Medical/Surgical Instruments & parts
Note: y-o-y growth of the commodity in India’s imports for this quarter is mentioned in parentheses
Source: Department of Commerce, MoC&I, GOI
4 Leading commodities are the top ten commodities with the highest value share in imports in the current quarter.

7Trade Watch Oct-Dec (Q3) FY 2025-26
4. Trade Direction
4.1 Merchandise Exports
India’s exports to its top markets
5
contributed around 50.5% of total exports in Q3 FY
2025-26, amounting to ~$55.8 bn, with a y-o-y increase of 0.8%. Spain entered the
top ten export destinations during the quarter replacing Hong Kong in the previous
quarter.
Among the top ten export destinations, India recorded positive y-o-y growth in Q3
FY 2025-26 across five markets, with the strongest growth observed in Spain (79%),
although total exports to the destination remain modest at $2.06 bn (Fig. 9). Export
growth to Spain was driven by strong demand for refined petroleum products in
southern Europe, particularly mid-distillates, alongside a broader reconfiguration of
Europe’s energy sourcing following EU restrictions on Russian fuel, which increased
reliance on alternative suppliers such as India
6
.
Other destinations posting strong growth include China, where exports expanded
by 65.8%, driven by higher shipments of petroleum products, engineering goods,
electronic goods, organic and inorganic chemicals, iron ore, and marine products.
This pattern underscores India’s expanding industrial capabilities and its growing
role as a supplier of raw materials and intermediate goods to China’s manufacturing
sector
7
. Exports to Germany and the UAE also surged due to strong demand for
engineering goods, electronics, and textiles, bolstered by strategic trade agreements
like the CEPA with the UAE.
Contractions were observed in five destinations among the top ten. The sharpest
declines in exports were to Singapore and the Netherlands, at 34% and 21.5%,
respectively. Meanwhile, the UK, Saudi Arabia, and Bangladesh recorded declines
of 9.3%, 15.1%, and 18.5%, respectively. The decline in exports to the Netherlands was
primarily driven by a sharp drop in petroleum products, along with weakened demand
for key commodities such as telecom instruments and electronic components.
Fig 9: India’s exports to major destinations
-40%
-20%
0%
20%
40%
60%
80%
100%
0
4
8
12
16
20
24
$Billion
Q3 FY25 Q3 FY26 % Y-o-Y Growth Q3 (RHS)% share in India's exports Q3'FY26 (RHS)
Source: Department of Commerce, MoC&I, GOI
5 Top markets are the top ten markets with the highest value share in total exports for the current quarter.
6 https://www.moneycontrol.com/news/business/spain-is-europe-s-new-hub-for-indian-petroleum-imports-soar-al -
most-46-000-13656471.html
7 https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2175702&utm&reg=3&lang=2

8Trade Watch Oct-Dec (Q3) FY 2025-26
4.2 Merchandise Imports
India’s share of imports from its top
8
markets continued to account for around 60%
of total imports in Q3 FY 2025-26, amounting to ~$117 bn. China, the UAE and Russia
continued to remain the major markets with Hong Kong recording a sharp import
growth of 48.1%. Japan entered the top ten import markets during the quarter
replacing Indonesia in the previous quarter. Decline in y-o-y growth was recorded
with five economies with the sharpest in Russia of 13.6% and the least with the UAE
of 0.4% (Fig 10).
Fig 10: India’s imports from major destinations
-20%
0%
20%
40%
60%
0
10
20
30
40
$Billion
Q3 FY25 Q3 FY26 % Y-o-Y Growth Q3 (RHS)% share in India's imports Q3'FY26 (RHS)
Source: Department of Commerce, MoC&I, GOI
Rising imports from Hong Kong were primarily driven by a surge in demand for
precious stones and metals, including a significant jump in pearl stone imports.
Imports from China increased due to a rise in fertiliser demand.
5. Regional Analysis
5.1 Merchandise Exports
India’s exports to its top 10 export regions, accounted for 88.6% of its total exports in
Q3 FY 2025-26, show a y-o-y increase of 1.4%. The top three regions recorded positive
growth, with North America accounting for approximately a quarter of total exports
during this quarter, recording a y-o-y growth of around 2.9%. EU countries, another
major export destination, experienced a y-o-y growth of ~16%. Contractions were
witnessed for five destinations within the top ten with the highest decline recorded
in Other European countries at 10.5%. (Fig 11)
Northeast Asia witnessed strong growth during the quarter, largely supported by a
surge in shipments from China and Hong Kong. At the commodity level, the increase
was driven by higher exports of copper, electrical machinery, natural and cultured
pearls, and cotton. Similarly, East Africa registered growth of about 22.1%, backed by
increased exports to Djibouti, Kenya, and Tanzania.
8 Top markets are the top ten markets with the highest value share in total imports for the current quarter.

9Trade Watch Oct-Dec (Q3) FY 2025-26
Fig 11: Region-Wise Export Composition and Growth
20.5%(2.9%)
16.3%(-2.3%)
13.8%(0.5%)
10.0%(33.5%)
8.8%(-9.2%)
5.8%(-8.4%)
4.0%(-10.5%)
3.4%(0.1%)
3.1%(22.1%)
2.9%(-6.4%)
0% 5% 10% 15% 20% 25%
North America
EU Countries
West Asia- GCC
NE Asia
ASEAN
South Asia
Other European Countries
Latin America
East Africa
West Africa
Note: y-o-y growth of the region in India’s exports for this quarter is mentioned in parentheses
Source: Department of Commerce, MoC&I, GOI
5.2 Merchandise Imports
India’s Q3 FY 2025-26 imports registered an overall y-o-y growth of 8.2% to the top
ten regions, reaching $183.9 bn this quarter. These regions collectively accounted
for 90.8% of India’s imports during the quarter. Six out of ten regions continued to
experience positive y-o-y growth. India’s imports mainly came from Asian countries,
i.e., North East (NE) Asia, West Asia and ASEAN countries, together accounting for
~53% of total imports during the quarter. (Fig 12)
Strong growth was observed in West Africa, with imports rising from $3.3 bn to $5.3
bn during the quarter, driven by a sharp increase in shipments from Ghana and
Burkina Faso. At the commodity level, the expansion was led by higher imports of
natural and cultured pearls, fertilisers, and cotton. Latin America also recorded robust
growth of around 47.21%, supported by increased imports of natural and cultured
pearls. In contrast, imports from EFTA declined by 11.6%, primarily attributable to a
reduction in gold imports.
The evolving regional composition of India’s exports highlights the growing
significance of emerging markets such as West Africa, East Africa, and NE Asia as
important avenues for diversification. While traditional destinations like North
America and the EU continue to account for a substantial share, the relatively faster
growth observed in regions such as East Africa and the steady expansion in NE
Asia indicate a gradual broadening of India’s export footprint. On the import side,
however, the concentration remains skewed towards regions such as NE Asia and
West Asia–GCC, underscoring continued dependence on a few key geographies
despite some growth in alternative regions like Latin America and Africa.

10Trade Watch Oct-Dec (Q3) FY 2025-26
Fig 12: Region-Wise Import Composition and Growth
26.2%(15.6%)
15.8%(-0.05%)
11.0%(8.6%)
8.5%(12.1%)
7.6%(15%)
7.0%(-13.6%)
4.9%(47.2%)
3.8%(-10.1%)
3.3%(-11.6%)
2.7%(59.8%)
0% 5% 10% 15% 20% 25% 30%
NE Asia
West Asia- GCC
ASEAN
EU Countries
North America
Other CIS Countries
Latin America
Other West Asia
European Free Trade Association (EFTA)
West Africa
Note: y-o-y growth of the region in India’s imports for this quarter is mentioned in parentheses
Source: Department of Commerce, MoC&I, GOI
In this context, it becomes important to systematically assess whether such shifts are
translating into a more diversified trade structure. The Herfindahl-Hirschman Index
(HHI) is therefore employed to quantify the degree of concentration in India’s trade
across regions, enabling an evaluation of whether the increasing engagement with
emerging markets is effectively contributing to diversification or if trade continues
to remain concentrated in a few key geographies.
6. Herfindahl-Hirschman Index (HHI) Analysis of India’s Trade Concentration
In an increasingly uncertain global environment marked by geopolitical tensions,
supply chain disruptions, and the reconfiguration of trade networks, the degree
of concentration in a country’s trade assumes critical importance. The Herfindahl-
Hirschman Index (HHI) serves as a useful indicator in this context, capturing the
extent to which trade is dependent on a limited number of products and regions. A
more diversified trade structure enhances resilience by reducing exposure to region
and product-specific shocks, while higher concentration can amplify vulnerabilities,
particularly in times of global instability.
The Herfindahl-Hirschman Index (HHI) for market concentration has been computed
to assess the degree of concentration in India’s trade across major regions, namely
Europe, Africa, America, Asia, and CIS & Baltics and top ten traded products. The index
is calculated as the sum of the squares of the share of each in total trade, thereby
assigning a higher weight to regions with larger shares. The index is interpreted
such that higher HHI values indicate greater concentration (and hence lower
diversification), while lower values reflect a more diversified and evenly distributed
trade structure.
The region-wise assessment of India’s HHI trends over recent years reveals a
divergence in the patterns of export and import concentration. On the export side,

11Trade Watch Oct-Dec (Q3) FY 2025-26
the index shows a steady decline, from about 33.2 in 2017–18 to 28.4 in 2024–25,
indicating that India is gradually diversifying its export destinations. This suggests a
broadening of market access and a reduced dependence on any single region. The
regional composition of exports supports this trend, with the share of Asia moderating
from nearly 49% to about 40%, and a corresponding increase in the shares of Europe
(to around 22%) and America (to over 25%). Africa has also seen a modest rise. This
shift reflects a more balanced geographical spread of exports, which strengthens
India’s ability to withstand demand shocks arising in specific regions.
Fig 13: Region wise HHI Fig 14: Product wise HHI
Source: Department of Commerce, MoC&I, GOI,
Author’s Calculation
Source: ITC Trade Map, Author’s Calculation
33.2
28.4
40.6
42.0
20
25
30
35
40
45
50
2017-18
2018-19
2019-20
2020-21
2021-22
2022-23
2023-24
2024-25
HHI Exports HHI Imports
17.9
13.9
6.5
5.7
0
5
10
15
20
20142015201620172018201920202021202220232024
HHI (Imports) HHI (Exports)
In contrast, region wise imports remain relatively concentrated, with the HHI staying
elevated over the period. Despite some fluctuations, there is no clear and sustained
movement towards diversification in sourcing. Asia continues to dominate India’s
import basket, consistently accounting for over 60% of total imports throughout the
period. While there are marginal increases in imports from other regions, including
Europe, America, and CIS & Baltics, these have not been sufficient to materially alter
the overall concentration pattern. This persistence reflects dependencies in sectors
such as energy, electronics, and for other intermediate goods, where supply chains
remain closely tied to specific regions. (Fig. 13)
At the product level, HHI has been computed by summing the squares of the export
and import shares of the top ten HS2 product categories for each year to assess
concentration trends. For exports, the HHI declined moderately from about 6.5 in
2014 to 5.7 in 2024, suggesting a gradual increase in diversification over the decade.
In the past 2–3 years, the index has shown a declining trend, suggesting a reduction
in concentration after a temporary spike, and a movement towards a more balanced
export basket. The composition of the top ten export products has remained largely
stable, with around eight commodities consistently featuring over the past decade,
with minor reshuffling. Notably, HS 71 (natural or cultured pearls, precious stones and
metals) has seen a significant decline in share from 12.82% in 2014 to 6.76% in 2024
indicating reduced dominance. HS 62 (apparel, not knitted), which was consistently
present in earlier years (2014-2019), no longer appears in the top ten in recent years,
while HS 73 (articles of iron and steel) has entered the top 10 product basket in the
last 2–3 years. Overall, the HHI values for goods exports remain in the lower range
implying that India’s exports are relatively diversified.

12Trade Watch Oct-Dec (Q3) FY 2025-26
For imports, the HHI declines from around 17.9 in 2014 to 13.9 in 2024, indicating
some degree of diversification over the decade; however, the index remains
consistently higher than that for exports, pointing to a concentrated import basket.
The composition of the top 10 import products has remained broadly stable over
the decade, with limited reshuffling. The composition is dominated throughout by
HS 27 (mineral fuels and oils), which retains a disproportionately large share ranging
from about 25–38%, underscoring India’s continued dependence on energy imports.
HS 71 (natural or cultured pearls, precious stones and metals) also remains a key
import category. HS 85 (electrical machinery and equipment) has seen its share
nearly double, from about 6.95% in 2014 to 12.09% in 2024. HS 88 (aircraft, spacecraft,
and parts thereof) has entered the top 10 product basket in the past 2 years. Overall,
while some diversification is evident, the relatively high HHI levels suggest structural
dependence on a few critical import categories, making import concentration an
important aspect from trade resilience and economic security perspectives (Fig. 14).
The contrasting trajectories of exports and imports highlight an asymmetry in
India’s trade diversification process, with clear progress on the export front alongside
continued import concentration. Strengthening alternative sourcing channels and
gradually reducing overdependence on specific regions and products will be key
to enhancing resilience. At the same time, sustaining the momentum of export
diversification will remain critical for ensuring stable and broad-based growth, while
also reinforcing India’s integration with a wider set of global markets.
Against this backdrop, it is important to assess not just the extent of diversification,
but also the degree to which India’s export basket aligns with global demand
patterns. The Trade Complementarity Index (TCI) provides a useful measure in this
regard, capturing how closely a country’s export profile matches its trading partners’
import demand. Computed using product-level trade data at HS-2 and HS-6 level,
the index compares the share of each product in a country’s exports with its share
in global imports, with the aggregated and normalised differences yielding a value
between 0 and 100. Values closer to 100 indicate a higher degree of complementarity,
implying stronger alignment with global demand. In India’s case, at HS2 level the
TCI with the world has shown a steady increase over the period 2014–2024, rising
from about 64.3 to 72.9. This upward trend suggests that India’s export composition
has been progressively aligning with global demand, particularly in sectors such
as engineering goods (including machinery and transport equipment), refined
petroleum products, chemicals, and certain segments of the electronics sector. This
is consistent with empirical evidence suggesting that higher trade complementarity
enhances export potential by enabling countries to align more closely with prevailing
global demand patterns
9
.
9 https://www.sciencepublishinggroup.com/article/10.11648/j.jwer.20180702.11

13Trade Watch Oct-Dec (Q3) FY 2025-26
Fig 15: India’s Trade Complementarity Index with the World at HS 6 and HS 2 (2014-2024)
51.7
54.7
64.3
72.9
40
45
50
55
60
65
70
75
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
HS 6 HS 2
Source: ITC Trade Map, Author’s Calculation
At a more disaggregated level of HS 6 digit, India’s TCI remains relatively stable over
the period 2014–2024, moving from about 51.7 to 54.7, indicating that while alignment
has strengthened, it remains selective and uneven across individual products. The
relatively moderate level of the index at the product level suggests that gains are
concentrated in specific product lines within sectors such as chemicals, engineering
goods, and petroleum products, rather than being broad-based. The index also
provides an indication of potential ‘natural trading partnerships’, where stronger
alignment can support sustained export expansion
10
.
At the same time, gaps persist in high-value and technology-intensive segments,
including advanced electronics, semiconductors, and sophisticated machinery, as
well as in certain labour-intensive sectors like textiles and apparel, where global
demand remains strong but India’s export share has not expanded proportionately.
Overall, while India’s export basket is becoming increasingly attuned to global
demand patterns, there remains significant scope to enhance competitiveness
across a wider range of products. Going forward, India needs to deepen export
diversification and strengthen capabilities in both high-value and labour-intensive
sectors to achieve a more comprehensive and balanced alignment with global
demand. (Fig 15)
7. Growing Role of FTA Partners in India’s Merchandise Trade
Over the past two decades, the nature of international trade has shifted from the
exchange of final goods to increasingly fragmented production processes spread
across countries, with nearly 70% of trade being linked to global value chains (GVCs),
where intermediate goods, components, and services cross borders multiple
times before reaching final consumers
11
. Free Trade Agreements when negotiated
prudently provide the framework that enables smoother cross-border movement
of intermediate inputs and coordination across production networks enabling
gains from access to technology, facilitating specialised production, and improved
integration with the global economy
12
. FTAs are associated with strong, positive
10

https://www.mdpi.com/2071-1050/16/2/582
11 https://www.oecd.org/content/dam/oecd/en/publications/reports/2019/11/trade-policy-implications-of-global-value-chains_
f182d1f5/4989ef9e-en.pdf
12 World-Development-Report-2020-Trading-for-Development-in-the-Age-of-Global-Value-Chains.pdf

14Trade Watch Oct-Dec (Q3) FY 2025-26
trade creation and have thus emerged as one of the most powerful instruments for
accelerating economic growth and enhancing competitiveness.
Over the past two decades, India’s trade has progressively shifted towards FTA
partner countries
13
, reflecting deeper economic integration and expanding trade
linkages. The share of trade with FTA partners has increased significantly from 4.6%
in 2006 to 28.8% in 2024, indicating a more than six-fold rise. In contrast, the share
of non-FTA partners has steadily declined from 95.4% to 71.2% over the same period.
India has signed 13 FTAs with various countries and regions, including Japan, South
Korea, ASEAN, SAFTA, Mauritius, United Arab Emirates, and Australia. The timeline of
agreements shows a steady progression from early partnerships such as Sri Lanka
(2000) and Singapore (2005) to more recent agreements like the UAE and Australia
in 2022, demonstrating a strategic push to widen trade engagement. Majority of
these agreements are with Asian countries signifying India’s strength in the regional
value chains.
India’s ongoing trade policy reflects a clear strategic push towards expanding
and deepening its FTA network. India is actively negotiating or advancing trade
agreements with key partners including United States, Israel, Gulf Cooperation
Council, Canada, and Mexico, while also reviewing and upgrading existing agreements
such as with ASEAN. These negotiations aim to enhance market access, facilitate
the seamless flow of goods and services, and strengthen investment linkages across
regions. For instance, the proposed India–GCC FTA is expected to promote trade,
attract investments, and generate employment, while discussions with Canada
target scaling bilateral trade to around $50 billion by 2030
14
.
This expanding pipeline of trade agreements signals India’s transition towards a more
outward-oriented and integration-driven trade strategy. By forging partnerships
across advanced and emerging economies, India is positioning itself more firmly
within global production networks and value chains.
Fig 16: Share of FTA and Non-FTA Partners in India’s Total Trade
4.6
6.2
18.1
19.7
28.8
95.4
93.8
81.9
80.3
71.2
0
20
40
60
80
100
2006 2010 2015 2020 2024
FTANon - FTA
Source: ITC Trade Map, Author’s Calculation
13 Countries/regions included in the analysis by year: 2006 (Thailand, SAFTA); 2010 (Thailand, SAFTA, ASEAN, South Korea);
2015 (ASEAN, Singapore, Malaysia, South Korea, Thailand, Japan, Sri Lanka, SAFTA); 2020 (ASEAN, Singapore, Malaysia,
South Korea, Thailand, Japan, Sri Lanka, SAFTA); 2024 (ASEAN, UAE, Singapore, Australia, Malaysia, South Korea, Thailand,
Japan, Sri Lanka, Mauritius, SAFTA).
14 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2233417&reg=3&lang=1

15Trade Watch Oct-Dec (Q3) FY 2025-26
India’s exports with its Free Trade Agreement (FTA) partner countries in Q3 FY 2025-
26 stood at $40.26 bn, reflecting a decline of 7% y-o-y, indicating some moderation in
export performance across key partner countries. In contrast, total imports from FTA
partners increased by 6% y-o-y, reaching $70.98 bn during the quarter.
In India’s export shipments to FTA countries, the contraction was led by Singapore
(-34.0%), followed by declines in Australia (-22.2%), Bhutan (-22.9%) and Mauritius
(-14.0%). Partially offsetting these declines, exports recorded growth to Thailand
(8.3%), Sri Lanka (9.9%), UAE (4.2%), and Malaysia (2.8%) (Fig 17).
Fig 17: Exports- FTA Partners
-40%
-20%
0%
20%
0
2
4
6
8
10
12
$Billion
Q3 FY25 Q3 FY26 y-o-y change in Q3'FY26 (RHS)
Source: Department of Commerce, MoC&I, GOI
Imports from FTA partners increased from $66.75 bn to $70.98 bn, registering a
growth of 6% y-o-y, driven by higher inflows from ASEAN (8.6%), Singapore (25.8%),
Japan (8.1%), Thailand (20.5%), Malaysia (4.1%), and SAFTA (12.1%). Imports declined
from Australia (-4.4%), South Korea (-2.1%), UAE (-0.4%), Bhutan (-40.4%), and Mauritius
(-87.6%) (Fig 18).
Fig 18: Imports- FTA Partners -120%
-80%
-40%
0%
40%
80%
0
5
10
15
20
25
$Billion
Q3 FY25 Q3 FY26 % YoY Q3 Growth (RHS)
Source: Department of Commerce, MoC&I, GOI

16Trade Watch Oct-Dec (Q3) FY 2025-26

17Trade Watch Oct-Dec (Q3) FY 2025-26
B.
THEMATIC ANALYSIS:
GEMS AND JEWELLERY

18Trade Watch Oct-Dec (Q3) FY 2025-26
B. Thematic Analysis: Gems and Jewellery
1. Overview
India’s gems and jewellery sector remains a critical pillar of the labour-intensive
manufacturing ecosystem, with a share of approximately 2.2% in total manufacturing
output and 7% of the GDP in 2022–23
15
. India is also the second-largest consumer of gold
jewellery
16
which is also reflected in its strong import demand of raw gold. In 2024, India
ranked as the 8
th
largest exporter and 7
th
largest importer globally for HS 71 (including
raw gold). The import basket is dominated by raw materials, comprising unwrought
or semi-processed precious metals and unworked stones, consistent with India’s role
in processing and value addition. In terms of export destinations, there is an acute
concentration of exports from India to the US, UAE and Hong Kong.
India is also the home to world’s largest cutting and polishing centre in Surat,
also known as India’s ‘Diamond City’. There are over 5,000 cutting and polishing
factories, ranging from family-run businesses to many of the diamond industry’s
biggest players
17
. The product captured under HS 7102 (Unworked and unmounted
diamonds) continues to dominate the global export basket, accounting for nearly
half of exports; however, its share has declined over the past decade. The sector is
labour-intensive, providing employment to over 50 lakh workers
18
. It has a strong
output multiplier (total increase in economy-wide output resulting from a unit
increase in final demand for a sector’s output) of 4.03, higher than various other
sectors
19
. Alongside its economic importance, the industry retains strong cultural
linkages
20
, supported by region-specific design traditions.
Globally, gems and jewellery (HS 71) account for 4.3% of total merchandise trade,
with an estimated value of $1.05 trillion which includes raw and semi-processed gold,
making it the fifth largest traded segment in 2024. It comprises gold, precious and
semi-precious metals, jewellery and related articles, diamonds, other precious and
semi-precious stones, and coins and legal tender. The sector is highly concentrated,
with gold, gold jewellery, and diamonds together constituting 85.4% of global
demand in 2024. However, excluding raw gold, the segment represents a global
market size of $378.1 bn with India commanding a share of 7.8% with an export value
of $29.5 bn in 2024.
The sector is currently navigating a phase of heightened uncertainty. Geopolitical
developments in West Asia and ongoing discussions around the India–US trade
agreement remain relevant, given their importance for India’s trade flows. The
Middle East accounted for 18% of India’s total diamond exports during the first nine
months of the current fiscal year. In addition, nearly 68% of India’s rough diamond
imports originate from the UAE and Israel, driven by the concentration of auction
activity in the region
21
.
15 https://www.pib.gov.in/PressReleasePage.aspx?PRID=1799277&reg=3&lang=2
16 https://www.ibef.org/industry/gems-and-jewellery-presentation
17 https://www.igi.org/world-diamond-cutting-center-shifts-to-dual-output/
18 https://gjepc.org/emailer_gjepc/19-1-2026/Making-G&J-clusters-Exportable.pdf
19 https://www.ncaer.org/wp-content/uploads/2020/10/1640083808NCAER_Report_Cluster_Mapping_Oct_2020.pdf
20 Diamonds are often considered a classic example of a Veblen good, where higher prices can increase their desirability
rather than reduce demand. Interestingly, as per a De Beers survey in 2022, Indians desire for natural diamond jewellery
has risen and for gold jewellery has fallen between 2019 and 2022 unlike China or the US which has recorded an increase.
21 https://www.crisilratings.com/en/home/our-analysis/reports/2026/03/middle-east-uncertainties-direct-trade-lng-depen-
dent-and-crude-linked-sectors-could-bear-brunt-of-prolonged-disruption.html

19Trade Watch Oct-Dec (Q3) FY 2025-26
At the same time, certain structural changes are becoming visible. Diamond prices
have moderated in recent periods, reflecting evolving consumer preferences,
including a gradual shift towards lab-grown diamonds and greater emphasis on
sustainability. China, the world’s second-largest market for diamond jewellery,
has seen demand decline since the pandemic due to economic pressures and
shifting consumer preferences. Additionally, sanctions on Russia, a major diamond
producer, have had some impact on established supply chains
22
. The segment is
also susceptible to seasonal demand fluctuations
23
. For example, demand in the
US and EU is highest during November-December. In the remaining months,
demand for gems and jewellery is lower, which affects the efficient use of labour and
infrastructure, especially in units located in Special Economic Zones (SEZs).
These trends indicate a gradual shift in the sector, with increasing diversification in
products and markets, alongside growing attention to technology and sustainability
considerations. At the same time, certain supply-side dependencies and external
risks continue to shape trade outcomes.
Against this backdrop, the following sections examine the trade dynamics of India’s
gems and jewellery sector in greater detail. The analysis covers product-wise and
market-wise trends, assesses the extent of concentration in trade patterns, and
highlights emerging areas such as lab-grown diamonds and new export destinations.
It also outlines key areas for policy focus to support value addition and improve the
sector’s overall trade performance.
2. Mapping the Global Trade Profile
The gems and jewellery segment has been examined at the HS-4 level under chapter
71 for 2024 in this section. It includes a wide range of products comprising precious
metals, precious and semi-precious stones and jewellery.
The segment represents a world demand of $378.1 bn, excluding raw gold (HS 7108),
with India exporting $29.5 bn, accounting for a 7.8% share. The nine major products
which includes precious metal jewellery, stones and diamonds in the segment
collectively account for over 97% of this demand totaling to about $366.4 tn. The top
two products i.e, precious metal jewellery and diamonds together account for 54.8%
of global demand amounting to $207.3 bn, with India’s collective exports in these
two products at $26.7 bn. This translates to a relatively strong share of 13% in world
demand reflecting its competitiveness in diamonds and precious metal jewellery. In
contrast, across the remaining products, which constitute 46.8% of global demand
and amount to $170.8 bn, India’s exports to the world at $2.8bn in these products
translates to a share of 2%, indicating a high degree of export concentration.
22 https://www.mckinsey.com/industries/metals-and-mining/our-insights/the-diamond-industry-is-at-an-inflection-point
23 https://icrier.org/pdf/ES/ES_CAN-NON-FISCAL-INCENTIVES.pdf

20Trade Watch Oct-Dec (Q3) FY 2025-26
Table 1: Comparison of India’s Trade Profile for Gems and Jewellery, 2024
Code Product label
World
Import
Prod-
uct
Share
in Total
World
Im-
ports
of the
Seg-
ment
India's
Export
India’s
export
share in
World
demand
India's
Import
India's
RCA
Top
Export-
er and
Value
Top Ex-
porter’s
RCA
'7113
Jewellery made
of gold or other
precious metals
$122.432.4% $12.3 10.0% $3.4 3.53
Italy
($15.8)
0.99
'7102
Unworked and
unmounted dia-
monds
$84.922.5% $14.4 16.9% $17.7 5.96
UAE
($15.6)
1.41
'7110
Platinum and
related precious
metals (palladium,
rhodium, etc.)
$44.0 11.6% $0.1 0.2% $2.7 0.05
South
Africa
($9.9)
1.73
'7106
Silver in raw or
semi-processed
form
$32.8 8.7% $0.4 1.3% $5.8 0.46
Hong
Kong
($4.4)
1.03
'7112
Scrap and waste
containing pre-
cious metals
$33.2 8.8% $0.1 0.3% $0.0 0.11
USA
($7.6)
1.76
'7115
Other articles
made of precious
metals
$24.6 6.5% $0.0 0.0% $0.0 0.00
USA
($1.15)
0.36
'7103
Loose precious
and semi-precious
gemstones (ex-
cluding diamonds)
$10.3 2.7% $0.5 4.5% $0.7 1.57
USA
($3.2)
2.39
'7117Imitation jewellery$7.8 2.1% $0.1 1.8% $0.0 0.63
China
($4.5)
4.43
'7118
Coins and legal
tender
$6.4 1.7% $0.2 2.9% $0.0 1.04
Ger-
many
($1.2)
1.45

Total for top prod-
ucts
366.4 28.0 7.7% 30.3
Total (Segment)*
24
378.1 29.5 7.8% 31.6
Note: Values in $bn
Source: ITC Trade Map
24 Raw gold (HS 7108) is excluded from the segment in the table. When included the world imports for this category
amounts to $1.05 trillion. However, it has not been included in the analysis as it does not capture high value-added seg-
ments appropriately.

21Trade Watch Oct-Dec (Q3) FY 2025-26
India’s exports in this segment, excluding raw gold, stood at $29.5 billion, accounting
for a global share of 7.8%. Including raw gold (HS 7108), India ranks as the 8
th
largest
exporter and 7
th
largest importer globally under HS 71.
Unworked diamonds (HS 7102) and precious metal jewellery (HS 7113) constitute
the core of India’s export basket. In diamonds, India exhibits a strong Revealed
Comparative Advantage
25
(RCA) of 5.96, accounting for 16.9% ($14.4 bn) of global
demand, despite also being a significant importer of rough stones ($17.7 bn). This
reflects India’s central role in the global cutting and polishing segment. The diamond
industry, however, experienced a decline in prices after prices peaked in March 2022
26
.
Similarly, in precious metal jewellery, India holds a notable export share of 10%,
with an RCA of 3.53, outpacing its competitors’ RCA, which is the leading exporter
globally. Demographic and behavioural changes continue to affect both industries
rapidly
27
. The shift towards lower-carat gold is gaining traction, now accounting for
approximately 40–45% of the market
28
. A similar trend is observed in the diamond
segment, where demand is increasingly shifting towards lab-grown diamonds
which were initially increasingly utilised for industrial applications
29
.
In contrast, segments such as platinum group metals (HS 7110) and silver (HS 7106)
show limited export competitiveness, with RCAs well below unity and continued
import dependence. For instance, platinum imports stand at $2.7 bn, while exports
remain marginal. However, globally there is a strong growth in the demand for
platinum, silver and precious metal scrap. These items collectively account for $103.5
bn, translating to a share of 10%. India’s demand for platinum is largely driven by
domestic jewellery demand
30
.
India demonstrates moderate competitiveness in select niche segments, including
coloured gemstones (HS 7103) and coins (HS 7118), where RCAs exceed unity, though
their contribution to overall trade remains limited due to small market size (Table 1).
Overall, India is competitive in four of the top ten segments with an RCA greater
than one. In HS 7108, a segment accounting for almost two-thirds of the entire
demand, the most demanded product is raw gold. Despite China, Russia and
Australia accounting for the highest gold mines in the world
31
, Switzerland, UAE
and UK are the top exporters with Switzerland alone accounting for one-third of
refined gold worldwide
32
. On the other hand, the UAE is a preferred destination for
gold due to its strong trade links with African countries for sourcing raw gold. In
addition, favourable logistics also play a key role in make it commercially viable
33
. The
two leading product segments globally, namely gold jewellery and unworked and
unmounted diamonds, have been analysed in detail.
25 A country is said to have a revealed comparative advantage (RCA) in a given product i when its ratio of exports of product
i to its total exports of all products exceeds the same ratio for the world as a whole. If RCA takes a value greater than unity,
the country has a revealed comparative advantage in that product.
26 https://www.idexonline.com/diamond_prices_index
27 https://shantigold.in/wp-content/uploads/2025/01/Industry-Report-on-Indian-Gems-and-Jewellery.pdf
28 https://www.gold.org/goldhub/research/jewellery-demand-and-trade-india-gold-market-series/17660
29 https://www.mckinsey.com/industries/metals-and-mining/our-insights/the-diamond-industry-is-at-an-inflection-point
30 https://gjepc.org/solitaire/indias-growing-appetite-for-platinum-jewellery-drives-global-demand/
31 https://www.gold.org/goldhub/data/gold-production-by-country
32 https://www.snb.ch/public/asset/en/www-snb-ch/publications/research/economic-notes/2025/economic_note_2025_04/
publications0_en/economic_note_2025_04.pdf
33 https://gulfnews.com/business/markets/how-the-uae-became-the-worlds-second-largest-hub-for-gold-
trade-1.500143644

22Trade Watch Oct-Dec (Q3) FY 2025-26
2.1 Mapping the Global Trade Profile in Precious Metal Jewellery
The precious metal jewellery segment (HS 7113) accounts for 32.4% of global demand,
with total imports valued at $122.4 billion. Within this, India emerges as a strong
player, with exports of $12.3 billion and imports of $3.4 billion, resulting in a clear
trade surplus making India a net exporter.
Table 2: Comparison of India’s Trade Profile for Precious metal Jewellery, 2024
Prod-
uct
code
Product
label
World
Im-
ports
Share of
Products
in Total
World
Imports
of the
Segment
India's
Global
Exports
India's
export
share in
World
demand
India's
Imports
Top Ex-
porter &
Value
India’s
Top
Export
Destina-
tion (%
share in
export of
the prod-
uct)
'711319
Articles of
jewellery and
parts thereof,
of precious
metal (other
than silver)
$113.5 92.7% $11.1 9.8% $2.9 UAE
UAE
(45.5%)
'711311
Articles of
jewellery and
parts thereof,
of silver
$8.5 6.9% $1.2 13.8% $0.4 Thailand
Hong
Kong
(52%)
'711320
Articles of
jewellery and
parts thereof,
of base metal
clad with
precious
metal
$0.4 0.3% $0.0 0.2% $0.0 USA
USA
(85.2%)
Total (HS
7113)
122.4 12.3 10% 3.4
Note: Values in $bn
Source: ITC Trade Map
The segment is heavily concentrated in articles of precious metal (excluding silver)
and constitutes 92.7% of global demand, which is primarily gold and platinum-
driven. India’s export basket mirrors this structure, with $11.1 billion in exports from
this category alone, accounting for 9.8% of global demand. Despite this strong
presence, India trails leading exporters such as the UAE, suggesting constraints in
scaling up value capture in premium segments, potentially due to limitations in
branding, product differentiation, and limited orientation toward specialisation in
low-carat jewellery.
Silver jewellery, while accounting for only 6.9% of global demand, represents a
relatively stronger niche for India. With exports of $1.2 billion and a 13.8% global share,
India demonstrates competitive strength in this segment, driven by traditional
craftsmanship. However, the limited size of this market constrains its overall
contribution to export growth. Overall, India’s export structure is aligned with global
demand patterns, with a strong surplus position.

23Trade Watch Oct-Dec (Q3) FY 2025-26
2.2 Mapping the Global Trade Profile in Unworked and Unmounted Diamonds
The diamonds segment (HS 7102) accounts for 22.5% of global jewellery-related
demand, with global demand valued at $84.9 billion. India exports $14.4 billion while
importing $17.7 billion, resulting in a trade deficit at the aggregate level. This also
reflects India’s role as a processing hub, where large volumes of rough diamonds are
imported, processed, and re-exported.
Table 3: Comparison of India’s Trade Profile for Unworked and Unmounted Diamonds, 2024
Prod-
uct
code
Product
label
World
Imports
Share of
product
in total
category
India's
Global
Exports
India's
export
share in
World
demand
India's
Imports
Top Ex-
porter &
Value
India’s
Top
Export
Destina-
tion (%
share in
export of
product)
'710239
Diamonds,
worked, but
not mount-
ed or set
(non-indus-
trial)
$57.16 67.3% $13.70 24.0% $11.4
India
($13.7)
USA
(35.6%)
'710231
Non-industri-
al diamonds
unworked
or simply
processed
$26.13 30.8% $0.66 2.5% $5.90
UAE
($ 9.7)
UAE
(50.7%)
'710210
Diamonds,
unsorted
$0.85 1.0% $0.00 0.0% $0.18
Canada
($0.5)
South
Africa
(83.2%)
'710221
Industrial
diamonds
unworked
or simply
processed
$0.57 0.7% $0.01 1.1% $0.17
Angola
($1.5)
Belgium
(18.3%)
'710229
Industrial
diamonds,
worked, but
not mounted
or set
$0.17 0.2% $0.00 0.0% $0.00
Cambo-
dia
($0.5)
Italy
(90%)
Total (HS
7102)
84.9 14.4 14% 17.7
Note: Values in $bn
Source: ITC Trade Map
The segment is dominated by worked, non-industrial diamonds, which constitute
67.3% of global demand ($57.2 billion). India is the leading exporter in this category,
with exports of $13.7 billion and a 24% share of global demand. This highlights India’s
strong comparative advantage in cutting and polishing, supported by established
clusters and skilled labour. In contrast, in unworked or simply processed non-
industrial diamonds (30.8% of global demand), India’s export share is only 2.5%,

24Trade Watch Oct-Dec (Q3) FY 2025-26
while imports are significant at $5.9 billion. This indicates dependence on external
suppliers, such as the UAE, Hong Kong, and Belgium, for raw inputs. Similarly, in
unsorted and industrial diamond categories, India’s export footprint is negligible,
with global leadership concentrated in countries like Canada and Angola.
3. Mapping India’s Trade Profile
In the context of shifting global demand dynamics and rising reliance on imported
inputs, India’s total trade in the segment (excluding raw gold) stood at $61.1 bn in
2024, with exports at $29.5 bn and imports at $31.6 bn, resulting in a deficit of $2.1
bn. Over the past decade, starting 2015, exports in this segment have contracted at a
CAGR of –1%, while imports have grown at 3% annually, leading to a steady expansion
of the trade deficit and a reversal from earlier surplus positions. The widening deficit
has been largely driven by increased imports of silver, platinum, and diamonds in
2024, reflecting sustained domestic demand and reliance on imports for inputs. At
the same time, India’s export basket remains highly concentrated, with diamonds
accounting for 46% of exports (cut and polished) in 2024, though this share has
declined from 53% in 2015, indicating some diversification but continued reliance on
a narrow set of products (Fig. 19).
Fig 19: India’s Exports and Imports of Gems and Jewellery (2015 to 2024)
8.8
2.2
8.9
5.6
3.3
-2.1
33.4
40.3
36.6
38.1
33.3
29.5
24.6
38.1
27.7
32.6
30.0
31.6
-10
0
10
20
30
40
50
2015 2017 2019 2021 2023 2024
Trade BalanceExportsImports
Note: Values in $bn and the values above exclude raw gold (HS 7108)
Source: ITC Trade Map
A comparison of the top five products in the world demand and India’s export basket
at HS 6 reveals that India’s value addition is concentrated in gold and diamonds.
Globally, raw gold dominates import demand (52.9%), followed by semi-processed
gold and jewellery (Fig. 20A). India’s exports are heavily concentrated in cut and
polished diamonds (45.9%) and gold jewellery (37.2%) (Fig. 20 B). Nearly half of
India’s gems and jewellery exports are concentrated in cut and polished diamonds,
primarily towards the US, Hong Kong, and the UAE.
Just like the rest of the world, India imports significant quantities of raw gold,
processes it, and re-exports it in terms of gold jewellery exports
34
. This reflects India’s
comparative advantage in labour-intensive processing, design, and craftsmanship,
especially in diamond cutting and jewellery manufacturing.
34 https://www.iima.ac.in/sites/default/files/2025-04/WP%20No.2025-04-02.pdf

25Trade Watch Oct-Dec (Q3) FY 2025-26
Fig 20.A: World demand basket, 2024 (83%) Fig 20.B: India’s export basket, 2024 (93%)
Raw gold;
52.9%
Partly
processed
gold; 11.1%
Gold jewellery;
10.8%
Cut and
polished
diamonds;
5.4%
Rough
diamonds;
2.5%
Others; 17.2%
Cut and
polished
diamonds;
45.9%
Gold jewellery;
37.2%
Lab-made
(synthetic)
diamonds uncut
& unpolished;
4.4%
Silver
jewellery;
3.9%
Rough diamonds;
2.2%
Others; 6.4%
Source: ITC Trade Map
Fig 21: India’s import basket (90.8%)
Raw gold;
61.8%
Rough
diamonds;
13.7%
Cut and
polished
diamonds;
7.1%
Partly processed
silver; 4.6%
Gold jewellery;
3.5%
Others; 9.2%
On the other hand, lab-grown diamonds account for a small share (4.4%) of exports,
despite India contributing around 15% to global production
35
. Demand for lab-grown
diamonds stems not only from their prices (despite being 80% cheaper in some
instances)
36
but also due to their low environmental impact (Fig 20.B). Compared
to natural diamonds, they use less water, emit fewer greenhouse gases and do not
involve human rights abuse which is often found in mining for natural diamonds.
These factors make them appealing.
India’s import basket reflects a dependence on external sourcing, driven in part by
limited exploration of domestic natural resource endowments, as well as relatively
underdeveloped trading and processing ecosystems compared to global hubs such
as the UAE and Switzerland. Imports are dominated by raw gold, which accounts for
nearly two-thirds, and rough diamonds, which account for over one-fifth of imports.
Most of these rough diamond imports are processed in Surat and Mumbai
37
(Fig. 21).
The performance of India’s Gems and Jewellery sector (HS 71) reflects important
structural shifts in both global alignment and domestic trade patterns over time.
The Trade Complementarity Index (TCI) for Gems and Jewellery (HS 71) at the HS
4-digit level highlights a significant decline in the alignment between India’s
35 https://www.pib.gov.in/PressReleasePage.aspx?PRID=1826136&reg=3&lang=2
36 https://www.mckinsey.com/industries/metals-and-mining/our-insights/the-diamond-industry-is-at-an-inflection-point
37 https://gjepc.org/emailer_gjepc/19-1-2026/Making-G&J-clusters-Exportable.pdf

26Trade Watch Oct-Dec (Q3) FY 2025-26
exports and global import demand, falling from 53.8 in 2001 to 25.1 in 2024. While
India historically enjoyed strong comparative alignment, driven largely by its
dominance in diamond cutting and polishing, this complementarity has weakened
over time. The decline reflects a combination of shifting global demand patterns,
increased competition from other processing hubs, evolving value chains, and a
growing preference for higher-value and branded jewellery segments, where India’s
export basket is relatively less positioned. As a result, despite remaining a key player
in select segments, the sector’s export structure is now less aligned with current
global demand, underscoring the need to reorient towards higher value-added and
design-driven exports (Fig. 22).
Fig 22: TCI for Gems and Jewellery at HS 4 Fig 23: HHI for India’s Gems and Jewellery
53.8
25.1
0
10
20
30
40
50
60
70
2001 2005 2010 2015 2020 2024
67.0
40.4
43.3 43.9
0
10
20
30
40
50
60
70
80
2001 2005 2010 2015 2020 2024
HHI Exports HHI Imports
Source: ITC Trade Map, Author’s Calculation
At the same time, product-level concentration trends present a more nuanced
picture. The Herfindahl–Hirschman Index (HHI) for exports shows a sharp decline
from 67.0 in 2001 to 40.4 in 2015, with this level sustained through 2024. This reflects
a decline in concentration alongside a gradual diversification of the export basket. It
is reflected in the changing export composition: the share of diamonds (HS 7102) has
declined significantly from about 80% to around 50%, while jewellery (HS 7113) has
increased markedly from 16% to 41%, emerging as a key driver of exports. In contrast,
import concentration has remained largely unchanged, with HHI stable at around
43–44, and continued dominance of gold imports (HS 7108), whose share has risen
from about 49% to around 62%, highlighting persistent dependence on a narrow set
of inputs (Fig. 23).
Overall, while India has made notable progress in diversifying and upgrading its
export basket, the weakening trade complementarity highlights the need for
deeper structural transformation to better align with evolving global demand and
strengthen competitiveness across higher-value segments.
4. Change in share in the Gems and Jewellery Exports over the years (2015-24)
Between 2015 and 2024, India’s global trade share in this sector has seen a marked
decline, falling from 6.1% to 2.9% when raw gold is included, and from 12% to 7.8% when
excluded. This decline has been driven primarily by a sharp fall in India’s exports of
diamonds, along with a reduction in share across most product categories, barring
two segments that have recorded only marginal gains of around 0.2–1.2%.

27Trade Watch Oct-Dec (Q3) FY 2025-26
During this period, the global gems and jewellery market has also witnessed an
increasing concentration of demand in raw gold whose share in world demand
rose sharply from 48.6% to 63.2%, an increase of 14.6%. In contrast, the other nine
products within the segment have either witnessed a marginal increase of less than
one percent or a decline. Unworked and unmounted diamonds (including cut and
polished diamonds), a segment in which India holds a global share of around 17%,
have witnessed a sharp 11.9% decline (Fig. 24).
Fig 24: India’s Changing Share in Global Demand for Gems and Jewellery (2015-24)
-15%
-10%
-5%
0%
5%
10%
15%
20%
0%
4%
8%
12%
16%
20%
Unworked and
unmounted
diamonds
Jewellery made of
gold or other
precious metals
Loose precious and
semi-precious
gemstones
Coins and legal
tender
Imitation jewellerySilver in raw or
semi-processed
form
Scrap and waste
containing precious
metals
Platinum and
related precious
metals
Gold in raw, semi-
processed or
powder form
Other articles
made of precious
metals
India’s export share in World demand (2015)India’s export share in World demand (2024)Change in product share in world demand (RHS)Change in India's share in world demand (RHS)
Source: ITC Trade Map
India’s dominance in diamonds remained largely stagnant despite a shrinking global
market, while its share in jewellery exports declined moderately from 9.2% to 8.7%,
suggesting weakening competitiveness in value-added segments. Although there
were marginal gains in smaller segments such as silver and platinum, these were
insufficient to offset losses elsewhere. Additionally, India experienced sharp declines
in lower-value segments such as imitation jewellery, scrap, and coins. Overall, the data
points to a structural misalignment, wherein India is losing ground in its traditional
export strengths.
5. Mapping Global Demand and India’s Export Footprint in Gems and Jewellery
The trade structure of India’s gems and jewellery sector reveals a high degree of
concentration across both products and partner countries for both exports and
imports. For the entire sector (including raw gold), India’s top export destinations
are the US, UAE and Hong Kong, together constituting 73% of gems and jewellery
exports. The US is India’s leading destination and accounted for almost one-third of
demand. UAE accounts for a little over one-fourth and Hong Kong at 17% in 2024. On
the import front, UAE, Switzerland and Hong Kong together supply over 60% of our
demand with UAE alone supplying 30.6% of our demand.
In raw gold (HS 7108), India’s exports are overwhelmingly directed toward Switzerland
(73%) and select hubs such as Thailand and the UAE, reflecting its role in refining-
linked trade networks. However, global exports are dominated by Switzerland, the
UAE, and the UK, while major import demand is dispersed across the UAE, Switzerland,

28Trade Watch Oct-Dec (Q3) FY 2025-26
and China, indicating that India remains peripheral in this high-value segment. In
contrast, in jewellery (HS 7113), India is more integrated into consumer markets, with
exports concentrated in the UAE (41.2%) and the USA (28.3%), though it faces strong
competition from Italy and the UAE in global exports. In diamonds (HS 7102), India
retains a relatively strong position as a leading exporter with a 16.9% share, supplying
primarily to the USA and Hong Kong, even as it also emerges as the largest importer,
underscoring its role in processing and re-exporting. The global diamond demand
landscape is concentrated in a few key consumer markets, led by the United States,
China, and India, with the Gulf region and Japan completing the top five. Demand
patterns vary significantly across regions in terms of market maturity and product
preferences. While mature markets such as the US and Japan exhibit relatively
stable demand with a preference for larger, high-value stones, emerging markets
like China and India show stronger growth in demand, particularly for smaller-sized
diamonds driven by affordability considerations and evolving consumer segments
38
.
Table 4: Mapping Global Demand and India’s Export Footprint in Top Gems and Jewellery Segment
HS Code Product
World
Imports
($ bn)
India’s Top
Export Des-
tinations (%
share)
Major Global
Exporters
(Share in
World Exports
%)
Top Importers
(%)
'7108
Gold in raw,
semi-processed or
powder form
673.4
Switzerland
(73%), Thailand
(18.5%), UAE
(18.5%)
Switzerland
(18%), UAE
(12.1%), UK
(10.2%)
UAE (15.6%),
Switzerland
(15.6%), China
(15.3%)
'7113
Jewellery made of
gold or other pre-
cious metals
122.4
UAE (41.2%),
USA (28.3%),
Hong Kong
(9.5%)
Italy (11.2%),
UAE(11.1%),
Switzerland
(9.6%)
Hong Kong
(15%), UAE
(13.7%), USA
(11.9%)
'7102
Unworked and un-
mounted diamonds
84.9
USA (34%),
Hong Kong
(24.5%), UAE
(13.6%)
UAE (18.4%),
India (16.9%),
USA (14.6%)
India (20.8%),
USA (18.1%),
UAE (17.2%)
'7110
Platinum and related
precious metals
(palladium, rhodium,
etc.)
44.0
Switzerland
(62.1%), USA
(13%), Italy (7%)
South Afri-
ca (23%), UK
(12.8%), USA
(11.7%)
USA (15.8), Chi-
na (12.6%), UK
(10.4%)
'7106
Silver in raw or
semi-processed form
32.8
UK (75.4%),
UAE (19.2%),
USA (3.3%)
Hong Kong
(12.9%), China
(11%), UK (10.5%)
India (17.6%),
USA (15.5%), UK
(13.3%)
Source: ITC Trade Map
In smaller segments such as platinum (HS 7110) and silver (HS 7106), India’s exports
are narrowly concentrated in a few destinations, while global supply is dominated
by resource-rich or trading hub economies such as South Africa, the UK, and Hong
Kong. (Table 4)
Overall, the pattern highlights India’s dependence on a select set of export markets,
its strength in process-driven segments like diamonds, and its weak integration into
high-value segments where global trade is dominated by a few specialised hubs.
38 https://web-assets.bcg.com/87/88/44ce24b646969ef49aa5a9c4b8b6/bcg-the-future-of-the-natural-diamond-industry-
may.pdf

29Trade Watch Oct-Dec (Q3) FY 2025-26
Over the last decade nearly 90% of India’s jewellery exports have flowed to just five
major markets: namely, the UAE, the US, Hong Kong, Singapore and the UK
39
.
6. Assessing Foreign Investment
40
Trends in Gems and Jewellery
FDI inflows into India’s gems and jewellery (G&J) sector have remained volatile over
the past decade, accounting for a small share of total FDI inflows. While overall
FDI equity inflows into India increased from $40 bn in 2015–16 to around $50 bn
in 2024–25 (provisional), the G&J sector attracted only a marginal portion, with its
share fluctuating between 0.02% and 0.52%. The sector witnessed a brief peak in
2017–18, when inflows reached $233 million (0.52% share), followed by a sharp and
sustained decline during 2018–19 to 2021–22, with inflows dropping to $13.8 million
and shares nearing 0.02%. Cumulative equity FDI inflows into the sector during this
period amounted to $0.73 billion, out of total FDI inflows to India of $481.5 billion,
translating to a share of approximately 0.2% over 2015–2024.
Fig 25: Foreign Direct Investment Flows in Gems and Jewellery (2015-24)
0.19%
0.52%
0.32%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0
50
100
150
200
250
2015– 16 2017– 18 2019– 20 2021– 22 2023– 24 2024– 25 (P)
FDI Equity Inflows in G&J Sector% Share of FDI Total Inflows in G&J Sector (RHS)
Note: Values in $bn
Source: Gems &Jewellery Association Analysis
41

Although there has been a gradual recovery since 2022–23, culminating in a notable
rise to $157.7 million (0.32%) in 2024–25, the overall magnitude remains modest
relative to the size and export potential of the sector. This trend suggests limited
investor confidence and points to structural challenges, including low value addition,
regulatory constraints, and heavy reliance on imported raw materials. Overall, the
persistently low share of FDI indicates that the G&J sectors potential in attracting
investments has not been fully leveraged (Fig. 25).
39 https://www.gold.org/goldhub/research/jewellery-demand-and-trade-india-gold-market-series/17663
40 Foreign Direct Investment comprises of the sum of Equity Inflow, Reinvested Earnings and Other Capital, we have ana-
lyzed only FDI Equity Inflow. FDI Equity Inflow forms the major component.
41 https://gjepc.org/pdf/market_reports/FDI-Inflows-in-Gem-and-Jewellery-Sector-April’2024-Mar’2025.pdf

30Trade Watch Oct-Dec (Q3) FY 2025-26
India’s Position in Gold Refining and Evolving Dynamics in
the Diamond Industry
India’s industrial trajectory demonstrates its ability to build globally competitive
sectors, as seen in petroleum refining and diamond processing, while also highlighting
the challenges that persist in emerging areas such as gold refining. Today, India is
the fourth-largest petroleum refining hub globally, with an installed capacity of
over 258 million tonnes per annum
42
, a position achieved through sustained policy
support, targeted investments, and a long-term focus on self-sufficiency. Similarly,
the diamond industry has leveraged labour-intensive processing strengths, scale
efficiencies, and a skilled workforce to establish global dominance, handling nearly
90% of the world’s diamonds and accounting for around 75% of global turnover by
value. These successes indicate strong underlying capabilities; however, the transition
to becoming a gold-refining hub remains constrained by a mix of structural, policy,
and operational constraints.
Unlike established global hubs such as Switzerland
43
and the UAE, which benefit
from favourable policy regimes, large-scale operations, and deep integration with
international markets, India’s gold refining ecosystem continues to face multiple
bottlenecks. Domestic gold mining output remains negligible at around 1–2 tonnes
annually
44
, compared to consumption levels of 800–1000 tonnes
45
, resulting in a heavy
reliance on imports. Historically, the duty structure has not sufficiently incentivised
refining, with only a narrow differential between doré
46
and refined gold. While a
modest advantage existed between 2013 and 2016
47
, subsequent duty rationalisation
under GST and post-2021
48
adjustments shrank margins for refiners
49
, leading to
closures. At the same time, capacity remains fragmented, while the number of
refineries increased from fewer than five in 2013 to about 33 in 2021, most remain small
operations under 50 tonnes annually, limiting economies of scale. Global integration is
also constrained by limited international accreditation, with only one London Bullion
Market Association-accredited refinery, restricting access to global financial markets
and reducing India’s ability to position itself within international supply chains
50
. These
challenges are compounded by financial and operational constraints, including high
working capital requirements, limited access to capital, regulatory complexities, and
informal operations. Countries like Switzerland and Hong Kong are top gold exports,
with estimates stating that Switzerland alone refines 70% of the world’s gold
51
and this
42 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2096817&reg=3&lang=2
43 https://www.niti.gov.in/sites/default/files/2019-06/Report_GoldMarket.pdf
44 https://mines.gov.in/admin/download/67b48dd05215b1739886032.pdf
45 The New Indian Express; World Gold Council (Extracted from Statista; https://www.statista.com/statistics/896708/in -
dia-gold-demand-volume-annual/?srsltid=AfmBOorNGinAWNZVovubcteIljm3-gAhPscUYoPF4g03mMWPXMUxVHWS)
46 Gold from mines is produced as doré which is the alloy generally consists of a mix with silver and other metals which is
further refined to gold of different forms and purity.
47 Between 2013 and 2016, India had a higher duty on bullion (10%) than on doré (8–9%), giving refiners a 1–2% advantage.
After 2016, this gap narrowed as doré duties were adjusted to 8.75% in Export Free Zones and 9.35% in the Domestic Tariff
Area. The 2017 GST further removed the EFZ advantage, reducing the duty differential to around 0.65%.
48 With the introduction of GST in 2017, the additional EFZ advantage was removed, leaving a much smaller and uniform
duty differential of about 0.65%. Post 2021, The difference in import duty rates between refined bullion (10.75%) and gold
dore (10.09%) remained at 0.66%.
49 https://www.phdcci.in/wp-content/uploads/2024/09/Framework-to-Strengthen-Indias-Gold-Processing-Industry-A-Step-
in-Building-Gold-Self-Reliance.pdf
50 https://www.niti.gov.in/sites/default/files/2019-06/Report_GoldMarket.pdf
51 https://asmp.swiss/en/swiss-industry/

31Trade Watch Oct-Dec (Q3) FY 2025-26
position is the result of the top refineries and role in finance
52
. Similarly, Hong Kong is
the primary conduit for gold flows in and out of China along with being a centre for
financial trading in Western markets
53
.
At the same time, while India’s diamond sector remains structurally strong, it is
increasingly being shaped by evolving global demand and supply dynamics. India
continues to dominate the global diamond processing segment, handling nearly
90% of the world’s diamonds and accounting for around 75% of global turnover by
value.
54
This structural advantage is supported by established cutting and polishing
capabilities, scale efficiencies, and availability of labour supply. At the same time, the
industry operates within a demand landscape heavily concentrated in the United
States, which accounts for over half of global diamond consumption, making it a key
anchor for long-term demand stability
55
. On the demand side, evolving consumer
preferences are emerging as a critical structural driver. The rising influence of Gen
Z consumers, expected to contribute nearly 30% of global luxury consumption by
2030, is reshaping the market
56
. This cohort places greater emphasis on sustainability,
innovation, and brand visibility, influencing how natural diamonds are positioned
relative to alternatives. In parallel, the slowdown in China’s luxury consumption, the
second largest retail markets, marks a structural shift, reflecting both post-pandemic
income uncertainty and changing attitudes towards discretionary spending
57
.
From a supply perspective, the natural diamond industry faces inherent structural
constraints. Primary supply, driven by mining, is increasingly limited as several major
mines approach the end of their operational life cycles. The concentration of production
is dominated by Russia
58
, followed by Botswana, Angola, Canada, South Africa, and
Congo adds to supply-side vulnerabilities. New exploration and mine development
remain capital-intensive and time-consuming, limiting the pace of supply expansion
59
.
The growing presence of lab-grown diamonds introduces a sustained competitive
pressure. While their penetration remains relatively low in India, they have gained
significant traction in key consumer markets such as the United States. This reflects a
broader transition in consumer acceptance of alternatives. In response, global industry
stakeholders have undertaken coordinated efforts such as the Luanda Accord, aimed
at promoting natural diamonds and sustaining demand
60
.
In this context, India’s experience underscores both opportunity and transition: while
its proven strengths in large-scale industrial development and value-added processing
provide a strong foundation, addressing structural and policy constraints will be critical to
diversify exports, enhance competitiveness, and move up the value chain.
52 https://www.spmi.swiss/the-role-of-switzerland-in-the-precious-metals-sector
53 https://sbma.org.sg/media-centre/publication/crucible/hong-kong-gold-exchange-bridging-heritage-and-innovation-in-
asias-precious-metals-market
54 https://www.ibef.org/blogs/india-s-sparkling-future-the-rise-of-lab-grown-diamonds
55 https://gjepc.org/solitaire/the-future-of-the-diamond-industry-navigating-challenges-and-opportunities/
56 https://gjepc.org/solitaire/redefining-desire-how-the-jewellery-consumer-is-evolving/
57 https://www.thediamondpress.com/post/china-s-diamond-inventory-dump
58 Alrosa, De Beers and Rio Tinto together account for over 60% of global diamond mining with Alrosa and De Beers each con-
trolling about 25% of the market. (https://www.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/2697228)
59 https://web-assets.bcg.com/87/88/44ce24b646969ef49aa5a9c4b8b6/bcg-the-future-of-the-natural-diamond-industry-
may.pdf
60 https://gjepc.org/solitaire/gjepc-signs-historic-luanda-accord-that-commits-1-of-rough-sales-revenue-to-global-natural-
diamond-marketing/

32Trade Watch Oct-Dec (Q3) FY 2025-26
●Gold refining remains constrained by import dependence, weak duty
incentives, fragmented scale, and limited global integration, restricting its
emergence as a competitive hub.
●The diamond sector, though globally dominant, faces pressures from
concentrated demand, shifting consumer preferences, and rising
competition from lab-grown alternatives alongside tightening natural
supply.
●Gold refining requires a stable doré–refined duty differential, development
of large-scale integrated refineries, and stronger global integration through
accreditation, IFSC linkages, and improved financing access.
●Sustaining competitiveness in the diamond sector will depend on market
diversification, stronger branding and traceability, moving up the value
chain, and a dual strategy for lab-grown and premium natural diamonds.
7. Lab-Grown Diamonds (LGDs): Emerging Segment within India’s Gems &
Jewellery Sector
Lab-grown diamonds (LGDs) are emerging as a technology-driven, high-growth
segment within India’s gems and jewellery sector, particularly amid weakening
natural diamond demand. Globally, the lab-grown diamond jewellery market is
expected to rapidly rise to $ 15 bn by 2035
61
. Produced using advanced technologies
such as Chemical Vapour Deposition (CVD) and High-Pressure High Temperature
(HPHT), LGDs are chemically, physically, and optically identical to natural diamonds,
making them a viable substitute in both jewellery and industrial applications.
62

India’s strong position is anchored in its legacy advantage, processing nearly 90% of
the world’s diamonds, which has enabled it to transition from a polishing hub to an
emerging producer and innovator in LGDs
63
.
India’s LGD segment has scaled up rapidly, supported by rising global demand for
affordable and sustainable luxury products. The domestic LGD market is estimated
at around ₹3,452 crore (~$400 million) in FY2025 and is projected to grow to ₹5,179
crore (~$600 million) by FY2028, reflecting a CAGR of ~14%. On the production side,
India produced over 3 million lab-grown diamonds in 2023, accounting for more
than 15% of global output, underscoring its growing importance in the global value
chain
64
. However, recent export trends indicate moderation due to global price
corrections and demand slowdown. While volumes continue to expand, export
values have come under pressure, reflecting a shift toward a volume-driven, lower-
margin trade structure
65
.
This suggests a structural shift in global diamond demand, in which LGDs are
increasingly serving as substitutes rather than complements to natural diamonds.
Beyond their use in jewellery, lab-grown diamonds are increasingly utilised in
61 https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1901713&reg=3&lang=2
62 https://indextb.com/files/2024/2/8db09639-7041-499b-892b-7fddb1f11880_Manufacturing%20of%20Lab%20Grown%20
Diamonds.pdf
63 https://www.ibef.org/blogs/india-s-sparkling-future-the-rise-of-lab-grown-diamonds
64 https://www.ibef.org/blogs/india-s-sparkling-future-the-rise-of-lab-grown-diamonds
65 https://gjepc.org/news_detail.php?news=gem-jewellery-exports-at-us-23-19-billion-remain-stable-in-april-2025-january-
2026-india-us-trade-agreement-framework-brings-relief-and-sets-stage-for-recovery-gjepc-1

33Trade Watch Oct-Dec (Q3) FY 2025-26
advanced technology applications, including computer chips, satellites, and 5G
networks, owing to their ability to operate efficiently under extreme conditions and
at higher speeds with lower power consumption than silicon-based materials. Their
unique properties also make them valuable across a wide range of sectors, including
defence, optics, thermal management, and medical technologies, highlighting their
expanding industrial relevance. However, this shift is also associated with greater
price volatility and lower margins, thereby altering the sector’s traditional value
dynamics.
India has established itself as a leading global player in LGDs, driven by its cost
competitiveness, skilled workforce, and cluster-based manufacturing ecosystem.
The country’s advantage lies in midstream capabilities, cutting, polishing, and
processing, combined with growing domestic production capacity. However, the
sector remains import-dependent for critical inputs such as CVD reactors and
diamond seeds, limiting domestic value addition and exposing the industry to
supply chain vulnerabilities.
The Government of India has already recognised lab-grown diamonds (LGDs) as
a technology-driven segment and has taken steps to build domestic capabilities.
The Union Budget 2023–24 announced a ₹242 crore research grant for setting
up the India Centre for Lab-Grown Diamonds (InCent-LGD) at IIT Madras, aimed
at developing indigenous technology, including reactors and diamond seeds, to
reduce import dependence and strengthen upstream value addition
66
. In addition,
the extension of duty-free imports for LGD seeds and sawn diamonds until March
2028 is a pragmatic measure taken in Union Budget 2026-27. It helps contain input
costs, supports production and export growth, and reinforces a rapidly expanding
segment in which India already holds a strong global position, thereby strengthening
the long-term outlook for the industry
67
.
On the regulatory side, the Bureau of Indian Standards (BIS) has introduced
standardised terminology with the new BIS standard (IS 19469:2025) which aligns
India’s diamond industry with international norms by adopting a modified version
of ISO 18323:2015. Specifically, it clearly defines categories such as natural diamonds,
laboratory-grown diamonds, treated stones, and imitations, while mandating precise
and non-misleading nomenclature. It restricts the use of the term “diamond” to
natural stones and requires full disclosure for lab-grown and treated diamonds using
approved terminology
68
. These standards also align it with the global ISO 18323.
Alongside 100% FDI allowance and export promotion support
69
, these measures
reflect a coordinated policy approach focused on R&D, cost competitiveness, and
market credibility, aimed at positioning India as a key player in the global LGD value
chain.
Despite strong growth potential, the LGD segment faces several structural challenges,
including price volatility, declining unit values, and high exposure to global demand
cycles. The increasing commoditisation of lab-grown diamonds has put pressure
on margins, even as production scales up. Additionally, the sector remains import-
66 https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1901713&reg=3&lang=2
67 https://www.indiabudget.gov.in/doc/cen/dojstru1.pdf
68 https://gjepc.org/solitaire/bis-standards-align-with-global-consumer-protection-guidelines-for-diamonds/#:~:tex -
t=The%20Bureau%20of%20Indian%20Standards%20(BIS)%20has,diamond%22%2C%20or%20%22LGD%22%20shall%20
not%20be%20used
69 https://www.ibef.org/blogs/india-s-sparkling-future-the-rise-of-lab-grown-diamonds

34Trade Watch Oct-Dec (Q3) FY 2025-26
dependent for critical inputs such as CVD reactors and diamond seeds, limiting
domestic value addition and exposing the industry to supply chain vulnerabilities.
External factors such as tariff uncertainties and demand fluctuations in key markets
further add to the sector’s risk profile.
Going ahead, the sector’s sustainability will depend on strengthening domestic
capabilities amid rising global price pressures and demand uncertainty. With lab-
grown diamond prices witnessing significant correction and exports facing volatility
in key markets, there is an increasing need to move beyond a purely cost-driven
model towards technology-led competitiveness. Developing indigenous capabilities
in critical areas such as reactor manufacturing and seed production can help reduce
external dependencies and improve value realisation. At the same time, enhancing
certification standards and product differentiation will be essential to counter
commoditisation and maintain export margins. Creating a more structured and
accessible production ecosystem can also support industry consolidation, entry of
efficient firms, and job creation, enabling India to sustain its global leadership while
adapting to the evolving dynamics of the LGD market.
Key Success Factors of India’s Leading Gems and Jewellery Clusters
70,71,72
India’s gems and jewellery (G&J) sector has grown in a highly cluster-driven and
regionally concentrated manner, with a few states emerging as clear leaders. Gujarat
– Surat has emerged as the world’s largest diamond cutting and polishing hub, while
Maharashtra – Mumbai dominates trade, finance and exports. Similarly, Rajasthan
– Jaipur has built a competitive advantage in coloured gemstone processing and
handcrafted jewellery exports while emerging centres such as Telangana – Hyderabad
are growing through modern manufacturing investments. Key drivers behind the
growth of India’s Gems and Jewellery are:
●Large Cluster Ecosystems and MSME-led Industrial Depth: The growth of
India’s G&J sector has been driven by dense geographic clustering that enables
scale efficiencies, specialised labour and strong supplier networks. Surat hosts
thousands of diamond cutting and polishing units and supports livelihoods
for millions, with women forming nearly 60% of the workforce (around 2.8 lakh
workers). Similarly, Mumbai has developed a deep industrial ecosystem with over
7,000 MSMEs engaged in jewellery manufacturing, processing and trade.
●Export Leadership and Institutional Trade Infrastructure: India’s leading
clusters are strongly export-oriented and supported by global trading platforms.
The Bharat Diamond Bourse strengthens India’s role in global diamond trading
and price discovery, while the Surat Diamond Bourse is expected to generate over
1.5 lakh jobs and enhance domestic value retention. In coloured gemstones, Jaipur
contributes around 17.5% of India’s total gems and jewellery exports, including
about 90% of Meenakari jewellery exports and around 60% of Kundan jewellery
exports, highlighting strong niche export competitiveness.
70 https://rising.rajasthan.gov.in/gems-and-jewellery
71 https://maitri.maharashtra.gov.in/gems-and-jewellery-2/
72 https://economictimes.indiatimes.com/industry/cons-products/fashion-/-cosmetics-/-jewellery/from-rough-to-radi -
ance-surats-diamond-industry-that-powers-millions/articleshow/129603358.cms?from=mdr

35Trade Watch Oct-Dec (Q3) FY 2025-26
●Processing Capacity, Skilled Workforce and Heritage-based Specialisation:
Cluster success reflects a combination of traditional craftsmanship and organised
industrial production. Jaipur processes more than 300 varieties of precious
and semi-precious gemstones through a structured ecosystem of around 112
operational factories, enabling product diversification and sustained export
growth. Large-scale mechanised jewellery manufacturing is also expanding in
export zones such as Santacruz Electronics Export Processing Zone, supporting
productivity and quality standardisation.
●Logistics Connectivity, Industrial Corridors and Market Access Advantage:
Efficient transport infrastructure and proximity to export gateways reduce
transaction costs for high-value goods. Rajasthan benefits from strong logistics
integration through the Delhi–Mumbai Industrial Corridor and connectivity to
major export ports such as Jawaharlal Nehru Port, strengthening trade mobility
for gemstone and jewellery clusters.
●Policy Support, SEZ-led Manufacturing and Emerging Diversification
Opportunities: Government-supported infrastructure has facilitated organised
production and investment inflows. The Hyderabad Gems Special Economic
Zone in Hyderabad hosts around 75–100 manufacturing units along with training
facilities, supporting export-oriented growth. Across clusters, future expansion
is expected in lab-grown diamonds, synthetic gemstones, customised fashion
jewellery and design-led branded exports, indicating a shift towards higher value
addition.
8. Industry Insights
73
on Key Constraints Affecting India’s Gems and Jewellery
Trade Performance
India’s gems and jewellery (G&J) sector is a key export driver, contributing significantly
to India’s total merchandise exports and employing over 5 million people. While
India retains global leadership in diamond processing, the sector continues to face
structural constraints across value addition, trade facilitation, financing, infrastructure,
and institutional support, limiting its ability to scale and move up the global value
chain. The key industry concerns are outlined below:
(i) Limited Value Addition and Fragmented Industry Structure: The sector
remains largely unorganised and MSME-driven, limiting economies of scale,
formalisation, and productivity gains. Industry stakeholders highlighted that
exports remain concentrated in low- to mid-value segments, with insufficient
focus on design, branding, and high-value product categories. Additionally,
slow adaptation to evolving global demand constrains diversification. There
is a need to build domestic capabilities in emerging categories experiencing
strong global demand, including lightweight and low-carat jewellery, luxury
smart jewellery, synthetic gemstones, and imitation jewellery. This structure
restricts India’s ability to capture higher margins within the global value chain,
with value addition remaining significantly lower compared to global leaders
such as Italy. As a result, despite strong volumes, India’s share in high-value
jewellery exports remains limited, undermining overall export competitiveness
and resilience to shifts in demand.
73 A stakeholder knowledge-sharing session was held to gather industry insights on challenges and strategies for boosting
India’s global competitiveness in the gems and jewellery sector.

36Trade Watch Oct-Dec (Q3) FY 2025-26
(ii) Inadequate Evolution as a Global Trading Hub: India has not fully leveraged
its processing strength to emerge as a global trading hub for diamonds and
gemstones. Regulatory ambiguities in Special Notified Zone (SNZ) operations,
limited participation of foreign mining companies and global tender houses,
and lack of tax competitiveness vis-à-vis hubs like Dubai and Antwerp constrain
trading activity. This results in high-value activities such as aggregation, pricing,
and trading continuing to take place outside India, leading to value leakage
and limiting India’s role to processing rather than full value chain integration.
Consequently, India is unable to maximise gains from global supply chain
realignments despite handling a dominant share of diamond processing.
(iii) Constraints in Trade Policy and FTA Utilisation: Existing Free Trade
Agreements (FTAs), including CEPA-type arrangements, are not adequately
aligned with sector-specific requirements, particularly for consignment-based
exports, which are not included in the FTA for duty exemptions, hampering the
G&J trade. Delays in duty drawback refunds and lack of clarity in export benefit
eligibility further affect liquidity for exporters. Given the sector’s high export
orientation, these constraints reduce its ability to respond to global demand
fluctuations and limit effective utilisation of preferential market access. In a
competitive global environment, delays in refunds and policy misalignment
translate directly into cost disadvantages and reduced export competitiveness.
(iv) High Cost of Finance and Limited Credit Access: The sector continues to face
high capital costs and limited access to formal finance, particularly for MSMEs.
Collateral requirements, lenders’ risk perceptions, and low penetration of credit
guarantee schemes constrain credit flow, despite the sector’s scale and export
contribution. Given the industry’s working-capital-intensive nature and long
export cycles, these financing constraints significantly impact liquidity, increase
reliance on informal credit channels, and raise overall production costs. This
undermines competitiveness, particularly against countries offering lower-cost
financing and export support mechanisms.
(v) Gaps in Raw Material Access and Cost Competitiveness: Access to key raw
materials such as gold, platinum, and rough diamonds remains fragmented
and costly. Limited access to duty-free inputs, restrictive eligibility under
mechanisms like IIBX (India International Bullion Exchange), and the absence
of efficient replenishment systems increase procurement costs, especially for
smaller exporters. These constraints directly impact cost competitiveness, as
global hubs such as Dubai provide seamless and cost-efficient access to raw
materials. Higher input costs reduce export margins and discourage scaling,
particularly for MSMEs operating in cluster-based ecosystems.
(vi) Skill Gaps and Limited Movement Up the Value Chain: Despite a large
workforce, the sector faces shortages in advanced skills such as Computer-
Aided jewellery Design (CAD)-based jewellery design, product development,
gemmology, diamond grading, precision stone setting, and modern
manufacturing techniques (e.g., casting, laser finishing). There are also gaps
in quality assurance, hallmarking, branding, and export marketing. Weak
industry–academia linkages and limited exposure to global design trends
further constrain upskilling. As a result, India remains strong in cutting and
polishing but lags in design-led and high-value segments, limiting its ability to
move up the value chain.

37Trade Watch Oct-Dec (Q3) FY 2025-26
(vii) Infrastructure Gaps and Need for Integrated Cluster Development: Although
India has established clusters and Special Economic Zones (SEZs)
74
, the absence
of integrated, world-class infrastructure, including logistics, testing facilities,
and design ecosystems, continues to affect efficiency. Major issues include
issues regarding the need to utilise idle capacity, amendments related to the
restrictions on subcontracting from DTA firms and the free movement of goods
(sale of excess stock to DTA, B2B, B2C approvals etc)
75
.
(viii) Ease of Doing Business and Regulatory Bottlenecks: Procedural complexities
across agencies such as Customs and DGFT, including delays in clearances
and lack of uniformity in processes, continue to affect operational efficiency
76
.
Limited appraisal capacity, gaps in skilled manpower, inadequate handling
infrastructure, and weak coordination among stakeholders further disrupt
the delivery process. In a sector where speed and reliability are critical, these
bottlenecks increase transaction costs and reduce India’s attractiveness as a
sourcing and trading destination, particularly for time-sensitive export orders.
(ix) Data Gaps and Weak Policy Monitoring Framework: The sector suffers from
a lack of integrated and granular data, with key datasets on production, trade,
and consumption fragmented across institutions. G&J is currently subsumed
under “Other Manufacturing” in national accounts, limiting visibility of its
actual contribution to GVA and employment. This constrains evidence-based
policymaking, real-time monitoring, and targeted interventions. In the absence
of reliable data, policy design remains reactive rather than strategic, affecting
long-term sectoral planning and competitiveness.
9. Way Forward
The analysis highlights that while India’s gems and jewellery sector has strong
foundational advantages in processing, scale, and employment, its global
competitiveness remains constrained by limited value addition, weak integration
into global trading ecosystems, and structural inefficiencies across finance,
infrastructure, and policy frameworks. With global demand shifting towards design-
led, lightweight, and high-value segments, aligning the sector with evolving market
trends, improving cost competitiveness, and strengthening institutional support
will be critical for India to enhance its global market share and move up the value
chain. The following priority actions are recommended:
(i) Drive Value Addition, Diversification, and Global Positioning: India must
transition from volume-driven exports to value-led growth by strengthening
design, branding, and product diversification. Despite strong processing
capabilities, the sector remains concentrated in mid-value segments, while high-
value markets are dominated by countries such as Italy. Promoting design-led
manufacturing, cluster-based R&D, and global branding initiatives (including
74 As of 2022, there are a total of 270 operational SEZs, of this 4 belong to gems and jewellery which account for over 1.5%
of the total operational SEZs. However, increasingly the exports from Domestic Tariff Area (DTA) have been on a rise
as compared to SEZs. DTA’s share has increased from 79.9% in 2015-16 to 81.13% in 2022-23. (https://gjepc.org/assets/pdf/
SEZs_Gjepc_booklet_11_3_2025_Final.pdf, https://icrier.org/pdf/ES/ES_CAN-NON-FISCAL-INCENTIVES.pdf)
75 https://seepz.gov.in/uploads/17619226196904ce3b21ae9_GJEPC%20website.pdf
76 Ecommerce is another area with potential for exports, however logistical roadblocks such as custom inspection delays and
high shipping costs continue to hamper its potential. https://seepz.gov.in/uploads/17619226196904ce3b21ae9_GJEPC%20
website.pdf

38Trade Watch Oct-Dec (Q3) FY 2025-26
cluster-specific GI tag) can enhance value realisation and align exports with
emerging demand segments such as lightweight and fashion jewellery.
(ii) Develop an Integrated Global Trading Ecosystem: To capture higher value
within the supply chain, India needs to evolve into a competitive trading and
distribution hub. This requires regulatory clarity for Special Notified Zones (SNZ)
operations, expanded participation of global mining companies and brokers,
and alignment of taxation frameworks with global hubs.
(iii) Strengthen Trade Facilitation, Raw Material Access, and Cost
Competitiveness: Improving export competitiveness requires addressing cost
and supply-side constraints simultaneously. This includes aligning FTAs with
sector-specific requirements (such as consignment exports), streamlining duty
drawback and refund mechanisms, and ensuring timely clearances. At the same
time, broadening access to IIBX, operationalising replenishment schemes, and
enabling efficient raw-material supply channels are essential to reducing input
costs and enhancing margin competitiveness, particularly for MSMEs.
(iv) Expand Financial Access and Reduce Cost of Capital: Given the sector’s
working capital intensity, improving access to affordable finance is critical.
Expanding collateral-free lending through strengthened credit guarantee
mechanisms, introducing targeted interest subvention, and promoting
alternative instruments such as export factoring and supply chain finance can
ease liquidity constraints. These measures are essential to reduce dependence
on informal credit and support the scaling of MSMEs.
(v) Invest in Skills, Technology, and Cluster Infrastructure: Enhancing productivity
and moving up the value chain requires simultaneous investments in skills,
technology, and infrastructure. Establishing Centres of Excellence, promoting
industry–academia collaboration, and enabling global exposure can strengthen
design and manufacturing capabilities. In parallel, developing integrated
jewellery parks with plug-and-play infrastructure, modern testing facilities,
and improved logistics connectivity will reduce operational inefficiencies and
support scale.
(vi) Improve Ease of Doing Business and Strengthen Data Systems: Simplifying
regulatory procedures across Customs and DGFT, ensuring uniform
implementation, and streamlining re-import/export processes are critical
to reducing transaction costs in a time-sensitive export sector. Additionally,
creating a robust data ecosystem through the separate identification of G&J
in national accounts, integrated datasets, and dedicated data governance
mechanisms will enable evidence-based policymaking and more effective
sectoral monitoring.

39Trade Watch Oct-Dec (Q3) FY 2025-26
C.
POLICY AND
GEOPOLITICAL
HIGHLIGHTS

40
Trade Watch Oct-Dec (Q3) FY 2025-26
C. Policy and Geopolitical Highlights
1. Global Trade–Related Policy Updates
• Iran–US–Israel Conflict & Strait of Hormuz Crisis: Since late February 2026,
tensions between Iran, the U.S., and Israel have disrupted the Strait of Hormuz,
through which nearly 20% of global oil supply transits daily, raising concerns over
global energy security
77
. Increased naval activity, targeted strikes, and security
risks have led to declining tanker movements and rising insurance premiums for
shipping, disrupting trade flows. As a result, crude oil prices surged beyond $100
per barrel, before retracing, inflationary pressures and highlighting vulnerabilities
in energy-importing economies
78
.
• Energy Market Shock & Global Trade Slowdown Risks: Missile strikes on key
energy infrastructure across the Gulf region have increased supply uncertainties,
pushing oil prices higher. Higher energy costs are raising transportation and
production costs globally, reducing trade volumes and industrial activity.
Multilateral institutions have warned that sustained energy price increases could
slow global GDP growth and weaken trade recovery, particularly for developing
economies dependent on energy imports
79
.
• Security & Strategic Dialogue Intensification: The Munich Security Conference
2026 highlighted growing geopolitical fragmentation, cyber risks, and the
weakening of multilateral cooperation frameworks. Discussions emphasized the
increasing overlap between security and economic policymaking, with countries
prioritizing supply-chain resilience, strategic autonomy, and technology controls.
This reflects a broader shift toward security-driven economic policies, including
trade related alignments, industrial policy interventions, and digital sovereignty
measures
80
.
2. India’s Trade
81
Policy Developments
• Impact of West Asia Crisis on India’s Trade & Economy: The Gulf region accounts
for ~12% of India’s total exports and imports
82
, with the UAE (exports: 7.5%; imports:
6.1%) and Saudi Arabia (exports: 2.36%; imports: ~3.9%)
83
as key partners. Crucially,
UAE acts as a major re-export hub that connects Indian trade to markets across
West Asia, Africa, and Europe. Energy remains a key component, with ~33% of
mineral fuel imports sourced from the Middle East. Similarly, fertilisers (~36%
import dependence) and precious stones and metals
84
(~32%) highlight reliance
on the region. Industrial linkages are also present through organic chemicals
(12.7%) and plastics (11.3%). However, non-POL import susceptibility remains
relatively limited and concentrated, with the UAE accounting for ~7.4%, Saudi
77 https://www.eia.gov/todayinenergy/detail.php?id=65504
78 https://www.worldbank.org/en/research/commodity-markets
79 https://www.imf.org/en/Publications/WEO
80 https://securityconference.org/en/publications/munich-security-report/
81 The events includes the latest developments in India’s trade recorded till the release of the publication
82 ITC Trade Map
83 Ministry of Commerce and Industry
84 A substantial share of this trade is routed through the UAE, which functions as a global re-export and trading hub. The
UAE aggregates supply from primary producers such as African countries and Russia, and redistributes it to major con-
suming and processing markets, including India. As such, the UAE operates as a critical node in the global value chain for
gems and jewellery, implying that India’s exposure is partly logistical and financial (hub-dependent) rather than purely
origin-based.

41Trade Watch Oct-Dec (Q3) FY 2025-26
Arabia ~1.3%, and all other West Asian countries individually contributing less
than 1%, indicating that broader manufacturing supply chains face lower direct
disruption risks. At the same time, sectors such as gems and jewellery show
high trade linkage with UAE hubs (~30–36% trade share), but their reliance on air
cargo (~85–90%) reduces direct maritime vulnerability while still exposing them
to indirect cost pressures. Imports remain dependent on the Gulf for inputs such
as energy, fertilisers, and petrochemicals, while exports rely on the region both
as a destination market (e.g., gems and jewellery exports to UAE ~36.5%) and as
a transit hub. This highlights the importance of the region in supporting trade
flows, including import supply chains, export realisation, and trade financing
channels. Connectivity with West Asia also supports India’s access to Central Asia
through established trade corridors and transit routes. Overall, the region plays a
key role in supporting India’s trade flows, supply chains, and market access.
• India–GCC Trade Negotiations: Developments in West Asia have influenced
the pace of progress on the proposed India–GCC Free Trade Agreement (FTA),
reflecting the link between regional conditions and trade diplomacy. The
Gulf region is an important partner for India for energy imports, exports, and
remittances, with a significant share of trade routed through this region
85
. The
Middle East accounts for a large share of India’s energy imports and overseas
workforce linkages. The ongoing engagement on the FTA indicates efforts to
expand market access, support trade diversification, and strengthen export
growth.
• RoDTEP Rate Restoration: The Government of India has restored RoDTEP
(Remission of Duties and Taxes on Exported Products) rates and value caps to the
levels prevailing as on February 22, 2026, with effect from February 23 to March
31, 2026, superseding the earlier notification that had reduced rates by 50%.
This timely intervention reaffirms the commitment to ensuring full remission
of embedded taxes for exporters, thereby supporting cost competitiveness
and easing pressures on export-oriented sectors. The decision has also been
accompanied by an extension of the scheme for a further six months (April–
September 2026) with the same rates and value caps, providing medium-term
policy certainty and continuity. The measure is expected to provide immediate
relief, enhance exporter confidence, and ensure continuity in trade operations,
reflecting a responsive and facilitative approach to sustaining India’s export
momentum in a dynamic global evironment
86
.
3. Commodity Price Trends
In early 2026, global commodity markets turned modestly bullish compared with the
last quarter of 2025, with the all-commodity index moving to a higher level. The uptick
was supported by firm gains in precious metals and a recovery in industrial metals,
which outweighed still-moderate energy prices. Heightened geopolitical tensions,
particularly around U.S.–Iran developments and broader Middle East risks, increased
uncertainty over energy supply routes and boosted safe-haven demand, pushing gold
and other precious metals higher. Industrial metals also firmed on improving demand
85 https://www.thehindu.com/news/national/west-asia-troubles-to-delay-indias-fta-talks-with-gcc-countries-and-israel/arti-
cle70762045.ece
86 https://www.dgft.gov.in/CP/?opt=notification

42Trade Watch Oct-Dec (Q3) FY 2025-26
expectations and supply-side constraints, while food prices remained broadly stable.
Although crude oil prices remained relatively range-bound, rising geopolitical risk
premia and improving sentiment across metals contributed to an overall strengthening
in the aggregate commodity index compared with Q4 2025.
Fig 26: Price indices across key commodity indices
100
140
180
220
260
300
340
380
420
All commodity indexAPSP crude oil($/bbl)Food indexCoal indexMetal indexPrecious Metals Index
Source: IMF
Crude oil prices showed renewed strength and elevated volatility in early 2026
relative to Q4 2025, reflecting rising geopolitical risk premiums, particularly linked to
U.S.–Iran tensions and potential disruptions in Middle East shipping routes. Volatility
has been amplified by concerns over disruptions in the Strait of Hormuz and
precautionary stockpiling, even as underlying supply remains adequate. Coal prices
remained relatively stable with an upward bias. Overall, energy markets contributed
to higher uncertainty and a mildly firmer commodity outlook, with fuel price risks
skewed to the upside.
Food prices remained broadly stable in the first two months of 2026 but carry upside
risks linked to energy market volatility. Rising crude oil prices increase transportation,
fertilizer, and input costs, which can transmit into food inflation if geopolitical
tensions persist. Additionally, elevated energy and fertilizer costs linked to Middle
East tensions pose risks to global food security and inflation if disruptions intensify
87
.
As a result, while food prices remain contained, rising fuel prices could push food
inflation higher in the near term.
Industrial metals strengthened modestly in early 2026 compared with the previous
quarter, contributing to the higher all-commodity index. Demand linked to
infrastructure spending, electrification, and energy transition technologies supported
copper, aluminum, and nickel prices, even as global growth remained uneven. Tight
inventories and supply constraints in key mining regions impacted adversely, while
improving manufacturing expectations added to the bullish undertone. However,
gains remained moderate relative to precious metals.
87 https://www.spglobal.com/energy/en/news-research/latest-news/agriculture/031326-middle-east-war-impacts-global-
food-security-over-fertilizer-fuel-and-freight-issues

43Trade Watch Oct-Dec (Q3) FY 2025-26
Precious metals continued to outperform in early 2026 and were the primary driver of
the higher all-commodity index
88
. Gold prices rose amid safe-haven demand, weaker
dollar expectations, and geopolitical uncertainty, with recent trading showing gold
rising steadily alongside gains in silver and platinum. Central bank purchases and
hedging against macroeconomic risks further supported prices. The continued
strength in precious metals, combined with volatile energy markets, imparted a
mildly bullish tone to the overall commodity complex despite mixed performance
across other segments (Fig 26).
88 https://www.bis.org/publ/qtrpdf/r_qt2603a.htm

44Trade Watch Oct-Dec (Q3) FY 2025-26
Contributors
Pravakar Sahoo Programme Director, NITI Aayog
Nalina Sofia T Director, NITI Aayog
Jyotika Nagvanshi Deputy Director, NITI Aayog
Mala Parashar Consultant-I, NITI Aayog
Pooja Teotia Consultant-I, NITI Aayog
Apica Sharma Consultant-I, NITI Aayog
Abhilasha Manda Consultant-I, NITI Aayog
Salome Sara Philips Young Professional, NITI Aayog
Riya Jindal Young Professional, NITI Aayog
Kavya Rao Young Professional, NITI Aayog
Nikita Gondolay Young Professional, NITI Aayog
Kruthi Raj Young Professional, NITI Aayog

Notes

Trade Watch- Quarterly (October - December [Q3] FY 2025-26)