Keep shining on us, 'crazy' diamond

India has managed to buy more time from the EU on stringent traceability requirements for polished diamond imports - the deadline has now shifted from March 2025 to January 1, 2026 - because of its unique place in the industry's value chain. The plan to sequester the diamond business into certifiable nodes from mine to market addresses the issue of stones sourced from conflict zones or from Russia. As the largest centre for polishing diamonds, India can be a source of unwanted diamonds entering the system. But the state of the industry - beset by weak demand in principal markets and the growing popularity of lab-grown diamonds - strengthens the case for not allowing Indian processing capacity to dip below critical levels. The acceptable solution is to raise vigilance over Indian imports while setting a lower bar for re-exports.

India's contribution to the trade is not easily replaced, given the labour intensity of polishing diamonds. But that does not give it indefinite leeway in enforcing traceability. Low-cost tech solutions abound. The industry will not reach governance objectives unless the Indian leg of the circuit is secure. It is welcome that the market-led initiative is sensitive to India's concerns, both as a production centre and a potential market for finished diamonds. Job displacement due to hurried rules would have been on a massive scale. Worryingly, the process could have become irreversible.

The pile-up of unpolished diamonds in India will ease with stricter monitoring of Russian diamond exports. India needs to reverse the situation in which its exports of diamonds are shrinking faster than imports. An extended export window without traceability conditions should help lower the inventory of raw stones. Yet, this does not address collapsing demand in the US, EU and China. Disruption in the supply chain due to sanctions against Russia is also raising price volatility, which affects inventory management in a pass-through economy like India. These factors will keep the Indian diamond processing industry under pressure, delaying the traceability initiative.