Various factors, including a shift in consumer preferences, have led to a rise in the demand for lab-grown diamonds, but retailers are still wary due to a lack of significant interest and uncertainty about its future.
The LGD industry is regarded as a sunrise industry and is emerging as a key driver for the global and Indian economies, supporting millions of livelihoods and boosting foreign exchange. The nation already produces around 3 million LGDs a year, accounting for 15% of the global production, according to the Ministry of Commerce and Industry.
The sector has the potential to employ approximately 1 million workers and achieve an annual revenue of $5.1 billion. China leads in LGD production, followed by India, Singapore and the US, according to the Gems & Jewellery Export Promotion Council.
Rapid Growth Likely
India's exports of polished LGDs are increasing by about 55% annually, representing approximately 6.2% of the natural polished-diamond exports. The India LGD jewellery market was valued at $264.5 million in 2022, according to the GJEPC.
Over the next 10 years, LGD jewellery sales will rise at a compound annual growth rate of 14.8%. The total market size is set to increase from $299.9 million in 2023 to $1.19 billion by 2033. it said.
India is the second-largest producer of LGDs, with 1.5 million carats in 2020. Surat and Mumbai are the major LGD hubs that are producing over 98% of the LGDs, the GJEPC said.
It pointed out that lifestyle changes and growing spending on premium and high-cost ornamental products were spurring growth in the Indian market. Greenlab Diamonds, Limelight Lab Grown Diamonds and Cupid Diamonds are the three major companies powering India to excel in the international LGD market.
Also Read: How To Buy Gold In 2024
What's Driving The Growth?
A report from IndexTb, which is run by the Gujarat Government, highlights the following factors for the rise in LGD demand:
LGDs are often perceived as more ethical and environmentally friendly.
Increasing disposable income and a shift in the perceived investment value of diamonds have contributed to a rise in global demand for diamonds of all shapes and sizes.
Younger consumers, in particular, tend to be more open to alternative choices, and LGDs resonate with those who seek uniqueness and innovation in their purchases.
The shift in consumer preferences towards experiences and values rather than traditional symbols of status can drive demand for LGDs.
Government's Initiatives To Promote Export
Various initiatives have been taken by the Union government for export promotion.
It has permitted 100% foreign direct investment, making India a lucrative market for LGD jewellery companies, according to the report.
Reduction of customs duty on LGD seeds to zero from 5%.
The government has also agreed to have clear segregation customs codes for silver and platinum-studded lab-grown jewellery for better differentiation and identification at the consumer level.
In April last year, the GJEPC held the first ever LGD buyer-seller meet, where 22 exhibitors presented their LGDs to 50 buyers from 13 countries. It is a platform for buyers and sellers to interact directly, negotiate deals, and develop long-lasting business relationships.
Why Are Retailers Shying Away From LGDs?
"As a retailer, we have always maintained that we will stay on trend with customer demand," Ramesh Kalyanaraman, executive director at Kalyan Jewellers, said. "In the case of lab-grown diamonds, we are yet to witness significant interest among the consumer segment."
Kalyanaraman underscored that with fluctuating prices, both globally and nationally, the future of LGDs remains uncertain. "As a customer-centric entity, we prioritise serving as a reliable consumer interface by offering products with a stable value proposition."
Until there is a clearer alignment between demand and supply, we have no immediate plans to pursue lab-grown diamonds.Ramesh Kalyanaraman, executive director at Kalyan Jewellers
However, while the Asian market is slower to adopt due to traditional perceptions of mined diamonds' emotional and investment value, a shift is imminent, according to Viral Mehta, managing director at Grown Diamond Corp.
Mehta asserted that the LGDs are gaining traction, fuelled by the Make in India initiative and robust demand from the US, Canada and Europe.
Retailers fear that the LGDs might cannibalise real diamond sales. However, as consumer mindsets evolve, it is just a matter of time before LGDs are set to become a significant force in the global jewellery market, according to Mehta.
"We are observing consumer behaviour now and doing research for the future," Suvankar Sen, chief executive officer of Senco Gold Ltd., said. "While lab-grown diamonds have potential, there needs to be more awareness among customers."
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