With an unexpected penal duty hitting front-loaded shipments of gems and jewellery to the US, India’s jewellery industry is already feeling the heat of the US tariffs, which came into effect on August 27.
“The market will be hit further if the concerns are not addressed within a quarter. A lot of demand had already been shipped to the US market before the tariff was implemented,” cautioned Sabyasachi Ray, Executive Director, Gems and Jewellery Export Promotion Council (GJEPC).
India has been slapped with some of the highest tariffs of 50 per cent by the US, impacting its textile, leather, and jewellery industry the most.
Anticipating losses, gems and jewellery exporters had “front-loaded” shipments to the US, a term that refers to accelerated shipment of goods to their destination before an expected disruption, such as a tariff increase, labour strike, or other regulatory change.
The US remains India's largest market for diamonds, and the fallout of the tariffs is expected to be especially severe on the state of Surat in Gujarat, which accounts for nearly 90 per cent of the world's diamond processing and directly employs about two lakh workers.
Also Read: From garments to leather exports: Sectors hit hardest by tariffs
According to the GJEPC, overall gross exports of gems and jewellery witnessed an increase of 15.98 per cent to USD 2.17 billion in July, and overall gross imports grew 26.55 per cent to USD 1.8 billion.
The export promotion council had submitted a detailed memorandum to the government on August 28, seeking policy, monetary, and banking interventions to help exporters withstand the disruption.
Among its key demands, the GJEPC has sought an extension of the export obligation period under duty-free gold import schemes from 90 days to six months for exports to the US, and permission for SEZ units to undertake reverse job work and offload inventory into the domestic market.
"Now the industry requires immediate extension of credit timelines from 90 days to say 180 days or more, moratorium in installment payment and interest equalisation to provide respite immediately," said Ray, who was in Kolkata to attend a conclave organised by the Indian Chamber of Commerce (ICC) on the diamond industry.
On the monetary front, the industry has recommended a reimbursement mechanism covering 25-50 per cent of the additional US tariffs for the August-December 2025 period, and enhanced market access assistance for participation in global exhibitions and promotion of Indian jewellery abroad.
The memorandum also calls for deferment of interest on working capital loans, a six-month moratorium on packing credit loans related to US exports, reintroduction of the interest equalisation scheme for exporters, and extension of pre-shipment finance by 90 days.
With exports slowing and orders being cancelled, the council says the risk of job losses has increased, and has urged support measures for workers, including restructuring of personal loans, education grants for girl children, and temporary coverage under the Ayushman Bharat scheme.
Ray still hopes the "penal tariff" would be short-lived. "We believe an understanding of the larger dimensions of the India-US relationship will eventually prevail," he added.
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