India Just Changed the Global Diamond Trade
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India made one of the most consequential moves for the global diamond industry this week, passing legislation that provides a 15-year income tax exemption for eligible foreign companies selling rough diamonds through the country’s Special Notified Zones.
The change is clearly good for India. It could also prove game changing for the global diamond trade.
But it did not happen in a vacuum. To understand why the legislation matters, it is necessary to look at why India has historically struggled to establish itself as a rough-diamond trading center, how the structure of the diamond market has changed, and why the competitive landscape between the major trading hubs is now being redrawn.
Until now, foreign diamond mining companies selling rough in India were taxed on an assumed profit equal to around 4% of their sales, resulting in an effective tax rate of roughly 1.2% to 1.4% of the sales value before applicable surcharges. Other foreign rough traders, including sightholders and dealers, could face the standard corporate tax rate on profits generated in India.
That helps explain why there has been so little international rough-diamond trading in India despite the country being by far the dominant and most influential diamond manufacturing center.
It has long been estimated that around 90% of the world’s diamonds are cut and polished in India. That share may have come down somewhat in recent years, but India still likely accounts for upward of 80% to 85% of global manufacturing.
The obvious question, therefore, is why more rough diamonds are not sold where they are ultimately manufactured.
Taxation has been a major reason. The rise of beneficiation in Southern African producer countries is another. The historical structure of the diamond trade also played an important role.
Why Rough Trading Developed Elsewhere
Dubai emerged as one of the largest diamond trading centers in terms of both value and volume, helped by its favorable tax regime, proximity to India and active schedule of rough tenders and auctions.
Beneficiation also strengthened Dubai’s position.
Indian manufacturers established factories in Botswana, Namibia, South Africa and Angola after producer governments linked access to rough supply with local manufacturing. Dubai increasingly became an aggregation, sorting and distribution center from which companies could decide where particular categories of rough should be manufactured.
Antwerp, meanwhile, maintained a significant share of the rough trade because of its expertise, access to markets and longstanding position at the center of the diamond business. Its predictable tax regime also helped. Known as the Carat Tax, companies are effectively taxed according to turnover rather than conventional profit calculations.
There were therefore clear incentives to sell rough in Dubai, Antwerp and Southern African centers such as Gaborone, while selling in India was comparatively expensive.
Rough Routes to Market
But there is another part of the story.
The diamond pipeline was never particularly efficient.
Historically, a diamond did not simply travel from the mine to a factory, then to a jewelry manufacturer and eventually to the consumer. The market was built around an ecosystem of dealer trading in which diamonds often changed hands several times before reaching the cutting wheel and again after being polished.
For decades, that structure served a purpose. De Beers, for example, held its sights in London until 2013. Goods would then move predominantly to Antwerp, but also to Israel, New York, Hong Kong and other centers.
Sightholder dealers would trade parcels, hold inventory, identify particular stones for particular clients and source goods from other suppliers to fill orders. A margin was added at each stage. Eventually, the rough would find its way to Surat for manufacturing.
The geography changed when De Beers moved its global sight activity from London to Botswana. The Africa-Dubai-Surat route gained prominence, reinforcing Dubai’s position between African production and Indian manufacturing.
At the same time, the role of the rough dealer began to diminish. Tender and auction houses increasingly performed some of the traditional dealer function by aggregating and distributing production.
Online trading also gave manufacturers greater access to the wider market. The logic was straightforward: if a manufacturer could sell directly to another manufacturer, jewelry wholesaler or retailer, why rely on a middleman and surrender part of the margin?
The contraction of the market accelerated that shift. As midstream profitability came under pressure, more manufacturers moved downstream into jewelry, using their rough supply for in-house polished and jewelry production. The pipeline became shorter and more vertically integrated.
India, however, remained comfortable in its role as the world’s manufacturing center. Despite repeated ambitions to broaden its diamond activity, it failed to create sufficiently competitive conditions to attract meaningful international trading. That is what this new legislation attempts to change.
India Needs to Recover Lost Value
The timing is important because India’s diamond industry is under considerable pressure. The global diamond market has been declining for roughly three years, and India has borne much of the impact because so many jobs and businesses depend on manufacturing.
India imported $11.1 billion of rough diamonds in 2025, down 40% from the $18.5 billion recorded at the market peak in 2022. Rough imports declined another 25% year on year during the first seven months of 2026.
The polished side tells a similar story. India’s polished exports lost 46% of their value between 2022 and 2025, falling to $12.5 billion last year, and declined another 9% in the first seven months of 2026. That is an enormous amount of value to disappear from India’s diamond economy.
India historically built its dominance by being the industry’s volume manufacturer. Its relatively low labor costs allowed factories to process smaller and lower-value goods that could not economically be manufactured elsewhere. Those categories have also been among the most heavily affected by the rapid growth of synthetic diamonds.
The industry is therefore no longer what it once was.
India needs to strengthen the services and value proposition surrounding its manufacturing sector if it wants to recover some of the activity that has been lost. Creating a competitive rough-trading environment is one way to do that.
Tariffs Changed the Competitive Equation
The second major factor is the shifting tariff environment in the United States. India lost part of its competitive advantage during the tariff negotiations of the past year, when duties on Indian goods at one stage climbed as high as 50% while trade talks continued, stalled and resumed.
In the latest framework, imports from India face a 10% US tariff, while diamonds polished in centers including Antwerp, Botswana and Namibia have gained exemptions. Other diamond centers, including the UAE, Israel, South Africa, China and Switzerland, face a higher rate of 12.5%.
That matters because the United States remains by far the world’s largest polished-diamond consumer market.
Tariffs therefore change the calculation companies make when deciding where to manufacture and trade their diamonds. Dubai may have an advantage because of its tax regime, but it is disadvantaged when goods shipped from there face a higher US tariff.
India remains the most cost-effective manufacturing center, but its goods are now more expensive when entering the United States than they were previously.
Antwerp and some African beneficiation centers, meanwhile, have gained an advantage under the tariff structure. The result is that the major diamond centers are increasingly competing for business on the basis of government policy.
That is a significant change. For much of the industry's history, the major centers had relatively well-defined roles. Antwerp was a trading center. India was the dominant manufacturing center. Dubai developed into a rough aggregation and distribution hub. Botswana and other producer countries pursued beneficiation.
Those distinctions are becoming less rigid. Countries increasingly want to capture a greater share of the diamond value chain within their own borders.
India Has Upped the Ante
Against that backdrop, the pressure on India’s industry to lobby the government for more competitive policies has grown considerably. The fall in manufacturing activity and the changing tariff environment have served as a wake-up call.
Policymakers effectively face a choice: support the industry in becoming more competitive or risk allowing its decline to continue.
The rough-trading tax exemption is therefore an important step, but it should not necessarily be the last one. The next logical move would be for India to abolish, or at least significantly reduce, its 5% duty on polished-diamond imports.
Doing so would encourage foreign polished-diamond companies to conduct more business in India. It could also encourage Indian diamond companies to move some trading activity back to Mumbai or Surat after shifting portions of their operations elsewhere.
That would help India evolve from being primarily a manufacturing center into a broader diamond hub. And that is why the 15-year tax exemption should not be viewed as a small administrative change.
It potentially applies to foreign mining companies, sightholders, dealers and tender houses. India’s industry leaders now have a strong incentive to actively recruit producers and trading companies to sell their rough in the country.
That effort has already started. India hosted a government delegation from Namibia this week as it sought to encourage closer diamond-trading ties. Namibia seems a particularly logical partner given the long-standing relationship between African production and Indian manufacturing.
A More Competitive Diamond World
The larger trend may be even more significant than the Indian tax change itself.
What we are seeing in 2026, and what arguably began last year, is a transition away from a highly globalized diamond-trading system in which individual centers fulfilled different functions.
In its place, a more competitive model is emerging.
Local interests and government policy are becoming more influential. Trading centers increasingly want to offer a vertically integrated proposition that combines trading, manufacturing, financing, logistics and access to consumer markets.
Antwerp and Dubai have been competing aggressively on that basis. Gaborone has sought to capture more value around Botswana’s production. Now India has re-announced itself as a contender.
That has potentially profound implications.
If meaningful volumes of rough begin to be sold directly in India, the historical rationale for moving diamonds through multiple trading centers becomes weaker. Manufacturers could gain more direct access to production. Mining companies could move closer to their largest customer base. The pipeline could become shorter again.
It may also shift the balance of power between the world’s major diamond centers.
India already dominates manufacturing. If it succeeds in building a meaningful rough-trading market alongside that capacity, it would control a substantially larger portion of the diamond value chain.
Whether that happens will depend on how aggressively the Indian industry takes advantage of the new rules, how producers respond and whether the government goes further in removing barriers to polished trading.
But India has unquestionably raised the stakes.
The global diamond trade is becoming less about centers playing their traditional roles and more about those centers competing to capture as much of the value chain as possible.
India has now entered that competition in a much more serious way, and it could change the diamond trading landscape altogether.
This article was written with the assistance of ChatGPT, based on a summary of the original video transcript.
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