Is India the next big player for lab-grown diamonds despite the challenges?

While the country is primed for growth, hurdles remain with lack of consumer awareness and balancing demand-supply chains

Up until 8-10 years ago, the idea of purchasing lab-grown diamonds was something of a one-off. It isn’t surprising, given that when you think of naturally-mined diamonds, words like ‘rare’ and ‘one-of-a-kind’ come to mind. Lab-grown diamonds, on the other hand, are quite literally grown in a laboratory, in a controlled environment. Now, with a shift in consumer mindsets and more players joining the industry, there has been a slow but growing acceptance of lab-grown diamond jewellery. In fact, on a recent state visit to the US, Prime Minister Narendra Modi gifted First Lady Jill Biden a 7.5 carat lab-grown diamond from Surat, Gujarat.  

Lab-grown diamonds are essentially similar in composition and even look the same as their naturally-mined counterparts, but are synthetic. There are two types of lab-grown varieties—chemical vapor deposition, or CVD diamonds, and high pressure and high temperature or HPHT diamonds. India is well-known for producing the CVD variety, said to be about 30-40 per cent cheaper than natural diamonds. 

Several reports indicate that with the push the industry has received, coupled with an ease in government regulations, India is now poised to be the biggest market for lab-grown diamonds globally. So, what’s contributing to this rosy picture? A report by Prabhudas Lilladher Pvt. Ltd. points out how around five years ago, there were just a handful of lab-diamond growers, which have gone up significantly in the last two-three years, in part, owing to a recession in the natural diamond industry. This has meant growing competition between lab- and mined-diamond companies.

Today, it costs US$ 300 to US$ 500 per carat to produce a CVD lab-grown diamond, compared with US$ 4,000 per carat in 2008. With the largest population of millennials in the world, India is perceived to become the largest market for lab-grown diamonds in the future, the report says.  

The report further states that the government has permitted 100 per cent foreign direct investment (FDI) in the sector under the automatic route. Additionally, as per the Union Budget 2019-20, the GST rate has been reduced from 18 per cent to five per cent.  

Shining bright

For those looking to make their first big purchase or even upgrade their diamond collection with fine jewellery, this news bodes well. Vikram Kasat, head of advisory, Prabhudas Lilladher Pvt Ltd, points out that India accounts for a noteworthy 15 per cent of the global lab-grown diamond production, producing about three million of these diamonds each year. The US, UAE and Europe are some key markets for export.

“The size of the consumer market has widened because of affordability. In India, where less than five per cent of women currently wear natural diamonds, the potential for LGDs to make diamond ownership accessible to the remaining 95 per cent is quite considerable,” he says, adding that due to the global depletion of natural diamond mines, supply is expected to decline to 60 million carats by 2030 from the current level of 116 million carats. This, while demand continues to grow steadily at two per cent per year, reaching an estimated 220 million carats. 

“This creates a demand deficit of nearly 160 million carats, which LGDs are poised to fill. Demand for LGDs is projected to surpass supply in the coming years, potentially even driving LGD prices higher,” Kasat offers.

Disha Shah, founder of DiAi Designs, a Mumbai-based lab-grown diamond jewellery brand, believes that LGDs have a strong future. “Of course, like I always say, natural diamonds will continue having their own place but lab-grown diamonds have opened up the market for more fine jewellery consumption.” She goes on to explain that those who would probably not be able to afford diamonds, can now own one, while those who already own diamonds either opt for bigger pieces or purchase lab-grown ones for gifting purposes.  

The biggest consumer base for Shah’s range of diamond jewellery falls in the age group of 25-40 years. “Most of our customers tell their mothers about it who then eventually purchase from us, but the awareness lies in the younger generation. They are more open-minded and see themselves saving the additional money to use on luxury items or experiences such as travel or even investments for that matter,” says Shah. 

A fine balance

While there definitely seems to be a bright future for lab-grown diamonds, the industry isn’t without its challenges, the most significant of them perhaps being consumer acceptance. According to Adeesh Nahar, founder of Rosa Amoris—a Mumbai-based fine jewellery brand that deals in natural diamonds— there is a lot of education and awareness that is still needed on lab-grown diamonds.

“While people are excited and open to the idea of LGDs, they’re still unclear about the buybacks and investment in these diamonds. People often confuse LGDs with American diamonds or Zircons, which are treated more as fashion jewellery,” he notes. Nahar also points out that since the price of lab-grown diamonds is continuously falling, it can’t really be considered an investment. “For anything to survive in the retail arena, it needs to have a stable, intrinsic value. Plus, there is no supply/production limit in LGDs.”

Vandana Jagwani, who comes from a family of traditional jewellers—Mahesh Notandass Fine Jewellery where she is creative head, along with running her own brand of lab-grown diamond jewellery called Vandals—believes that the industry is still shaping up. “Currently in India, it’s the pre-bride and post-bride consumer that’s a big purchaser when it comes to lab-grown diamonds. These are the ones who buy fine jewellery with their own money and without any parental interference,” she offers, adding that their jewellery ranges from ₹30,000 and goes up to ₹30 lakh, depending on the designs. Ask her what pushed her into launching a lab-grown jewellery label and she says that she soon realised after studying diamonds extensively, that both natural and lab-grown variants are quite similar. “A lot of it is perception-based and I wanted to offer a new product at a better value, then why not?”

For the industry to change though, Jagwani believes that the lab-grown diamond players should stop replicating the mined-diamond industry, with a focus on building value for one’s brand and product rather than just the price.

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