Surat, India’s sparkling diamond capital, is witnessing one of its most severe downturns in recent decades. Around 150,000 workers in the diamond industry have lost their jobs since the United States imposed a steep 50 per cent tariff on Indian imports in August, sending shockwaves through the world’s largest diamond-cutting hub. Once bustling with activity, the narrow lanes of Katargam and Varachha—where most polishing units operate—now echo with silence as workshops shutter and workers return to their villages. The diamond industry in Surat, which employs between 800,000 and 1 million workers, is the backbone of India’s gem exports. But the recent tariff escalation has upended this ecosystem, affecting everyone from cutters and polishers to brokers and exporters. The tariffs, imposed as part of Washington’s retaliation against India’s purchase of discounted Russian oil, have crippled demand in one of the sector’s largest export markets.
The scale of disruption is evident in India’s export figures. Between April and November, polished diamond exports dropped to $8.2 billion, down from nearly $9 billion during the same period last year. While global demand for luxury goods has softened, the sharp decline in exports is primarily attributed to the punitive trade measures by the US. The impact has cascaded across Surat’s small and medium diamond units. About 15 to 20 per cent of small polishing factories have shut down, according to Hasmukh Kakadiya, managing director of Kakadiam LLP, a major Surat-based manufacturer. “Workers from these units are unable to find jobs because no one is hiring,” he told CNBC TV. “Roughly 10 to 15 per cent of workers have already become jobless, and it is difficult to say when the situation will improve.” For the thousands of skilled artisans who rely on daily wages, the economic strain has become unbearable. Factories that remain open are cutting working hours to manage costs, leading to a steep drop in earnings. “Earlier, I used to earn ₹20,000 a month,” said one diamond polisher from the Katargam area. “Now, with fewer working days and no overtime, I barely make ₹10,000. It’s getting harder to manage food and rent.”
Impact on the Global Diamond Supply Chain
The US tariffs have not only affected India but also sent ripples through the global diamond supply chain. Surat processes over 90 per cent of the world’s rough diamonds, importing raw stones from mining giants in Russia, Africa, and Canada before exporting polished gems primarily to the US, Hong Kong, and the Middle East. With American buyers now facing higher import duties, many have shifted orders to competitors in Thailand and Vietnam, which are not subject to the same trade restrictions. India’s diamond sector has historically maintained a delicate balance between Western and Russian supply chains. However, the US sanctions against Russian diamonds—imposed after the Ukraine conflict—have complicated this dynamic. Indian traders who continued purchasing Russian roughs to maintain operations are now being penalized indirectly through higher tariffs, further isolating them from the global market. Industry insiders say the timing of the tariffs could not have been worse. The diamond trade was already reeling from subdued global demand post-pandemic, inflationary pressures in Western economies, and the rise of lab-grown diamonds, which offer cheaper alternatives to natural stones. “These tariffs have added fuel to an already burning fire,” said a senior member of the Gem & Jewellery Export Promotion Council (GJEPC). “Exporters are trapped between falling demand and rising costs.”
In Surat’s industrial clusters, the impact is visible on every street. Rows of small units, once illuminated by the sparkle of cutting tables, now stand shuttered. The hum of machinery and chatter of artisans have faded, replaced by the uncertainty of lost livelihoods. Local transporters and tool suppliers have also reported drastic revenue drops as business dries up. Diamond merchant associations estimate that over 20,000 small traders and polishing units have either closed temporarily or reduced operations to a fraction of their capacity. The downturn has also led to a reverse migration of workers back to Saurashtra and other regions in Gujarat, echoing the scenes of mass job losses witnessed during the COVID-19 lockdowns. “Many units cannot sustain operations when export orders vanish overnight,” explained Nirav Bhansali, an exporter and committee member of the Surat Diamond Association. “With high tariffs and declining global prices, profits have evaporated. Even medium-sized players are struggling to pay electricity bills and rent.” Amid the deepening crisis, negotiations between India and the United States for a Bilateral Trade Agreement (BTA) have become the industry’s only beacon of hope. Sources close to the talks suggest that both sides are working toward a framework pact by March 2026, which could ease or partially lift some of the punitive duties. However, officials caution that any progress will depend on broader geopolitical considerations, including energy trade and defense cooperation. India’s Commerce Ministry has been lobbying for tariff relief on key export categories such as gems, jewelry, textiles, and pharmaceuticals. A partial rollback could help stabilize the diamond trade, though experts warn that recovery will take time even after duties are reduced. “Once confidence is lost in a supply chain, rebuilding it is slow,” said a senior official from the Gem & Jewellery Export Promotion Council. “Foreign buyers may not return immediately.” The human cost of the downturn is staggering. Workers in Surat’s diamond units—many of whom migrated from rural Gujarat and Maharashtra decades ago—are facing an existential crisis. Small savings have vanished, and many are now relying on loans or community support. With few alternative employment options, daily survival has become uncertain. “My brother and I used to polish stones together,” said Rakesh Solanki, a diamond worker who lost his job in September. “The factory closed, and now we do odd jobs. The government talks about Make in India, but there is nothing to make when there is no demand.” Trade unions have urged the Gujarat government to provide emergency relief packages for jobless workers, including subsidized food and rent assistance. Some local NGOs have begun distributing ration kits, but the scale of need far exceeds the available aid.
The central government has maintained that it is monitoring the situation closely. The Ministry of Commerce and Industry has initiated discussions with US trade representatives and industry stakeholders to explore interim measures. Officials are also encouraging diversification of export markets to offset dependence on the US, which traditionally accounts for nearly 40 per cent of India’s polished diamond exports. To cushion the blow, the GJEPC has proposed policy support measures such as interest-free loans for small polishing units, tax incentives for exporters, and training programs for workers to upgrade their skills or transition to the lab-grown diamond segment, which is growing rapidly in domestic and international markets. “The immediate goal is to protect employment,” said Vipul Shah, chairman of the GJEPC. “We are in talks with both central and state authorities to ensure that the workforce does not collapse under this financial strain. India remains a key global player in the diamond trade, and we must preserve that status.”
A Shift Toward Lab-Grown Diamonds
While the natural diamond trade battles tariffs and sanctions, the lab-grown diamond (LGD) sector has quietly emerged as a lifeline for Surat. With lower production costs and strong demand in the US and Europe, LGDs are now being seen as a strategic alternative. The government has already extended incentives for the lab-grown industry under its PLI (Production Linked Incentive) scheme, viewing it as a way to sustain employment and export revenue. Industry analysts believe that if tariffs remain in place, more traditional diamond units may shift to lab-grown production over the next few years. However, this transition is not simple. It requires capital investment, new machinery, and advanced technical expertise, all of which are in short supply among smaller operators. As 2025 begins, optimism remains muted in Surat’s diamond corridors. The industry is in survival mode, relying on government diplomacy and hope for a trade breakthrough. While the Bilateral Trade Agreement discussions with Washington offer a potential lifeline, the path to recovery will depend on both economic pragmatism and political will on both sides. For the workers and small manufacturers who built Surat’s reputation as the world’s diamond capital, the situation remains precarious. The shimmering stones that once symbolized prosperity now reflect the uncertainty of thousands of families whose livelihoods hang in the balance. The future of Surat’s diamond industry hinges on timely policy action, market diversification, and the resilience of its workforce. Until tariffs are eased and trade channels reopen, the city’s sparkle will remain dimmed.
