How is the jewellery sector coping with U.S. tariffs? | Explained

The story so far: India’s diamond and jewellery sector has been hit due to the U.S. tariffs. While the U.S. has imposed a 50% import duty on India’s cut and polished diamonds, it has imposed a 50-57% duty on studded and non-studded jewellery, upsetting decades of well-set trade. India is the world’s largest exporter of cut and polished diamonds. At such a time, the sector wants government intervention which could absorb the shock caused by U.S. tariffs.

Why government intervention?

The U.S. is the largest importer of diamonds from India. In 2024-25, India exported diamonds worth ₹46,000 crore and studded gold jewellery worth ₹23,000 crore. Moreover, India’s cut and polished diamond industry employs 8.2 lakh skilled workers. The U.S. tariffs are likely to affect the jobs of 1.7 lakh skilled workers, as per the Gems and Jewellery Export Promotion Council’s prediction. Of India’s exporters, 85% are Medium and Small Scale Enterprises (MSMEs) which will not be able to bear the shock of the loss of the U.S. market in the short term. The industry has therefore sought short-term measures in terms of policy reliefs, aid for workers, and monetary and marketing benefits for three to six months, to help the manufacturers absorb the shock.

Which are the worst-affected States in India?

Gujarat, Rajasthan and Maharashtra are the worst-hit States. Most of the diamonds are cut and polished in the factories set up in Gujarat. Rajasthan has a concentration of manufacturing of jewellery with gems and semi-precious stones. Maharashtra is a manufacturing hub for studded and non-studded jewellery, and exports most of the diamonds.

What are the sought policy reliefs?

Some of the key policy reliefs sought by the industry are: to extend the export obligation period for exports made to the U.S. from 90 days to 270 days; allow reverse job work in DTAs (Domestic Tariff Areas) by jewellery manufacturing Special Economic Zones (SEZs); and allow SEZs to sell in the domestic market on payment of duty foregone. In simple terms, if a jewellery manufacturer imports gold for the export of jewellery, such export of ready-made jewellery has to take place within a period of 90 days. If not, an import duty of 6% and GST of 3% is levied. But with the orders from the U.S. suddenly drying up, many exporters are unable to ship their jewellery. That is why, the industry now wants the export obligation period to be increased.

The industry also wants the government to allow the SEZs to sell their goods in the domestic market with import duty forgone. Currently, the exporters are allowed to sell in the domestic market, but with a duty of 20% on the finished product. This makes them less competitive as compared to domestic manufacturers. Reverse job order refers to SEZs being allowed to manufacture for domestic buyers so that idle machinery and capability can be utilised; skilled workers can stay gainfully employed; and that factories set up after years of hard work can keep running.

What are the incentives demanded?

Some of the demands by the industry are — monetary incentives like interest subvention offered during the COVID period; temporary subsidisation of exports to the U.S.; worker-related benefits like restructuring of personal loans and inclusion under healthcare schemes; and marketing benefits such as giving exporters funding to explore newer markets. Other demands include banking incentives, liquidity packages, and finance extensions, among others.

Why the urgency?

The tariffs are disrupting businesses which were set for almost five decades. These tariffs will disproportionately affect MSMEs which have invested for years to build up their businesses. While large exporters will be able to navigate through this change, the bottom-line will be wiped out unless the government intervenes and provides short-term relief for three to six months, says the industry. The total bailout package in the form of various incentives is likely to be to the tune of ₹500 crore as per rough industry estimates. “The U.S. forms 30% of India’s gem and jewellery export. Most of this demand is fulfilled by MSMEs, which form the backbone of the sector, and which are now struggling to survive. We need urgent government help,” said Kirit Bhansali, chairperson of Gem and Jewellery Export Promotion Council.