Finance Minister Nirmala Sitharaman tabled the Economic Survey FY25-26 on Jan 29, 2026, ahead of the Feb 1 Union Budget; it highlights resilient macro fundamentals with FY25 GDP at 6.5% (provisional) and FY26 projection at 7.4%, driven by domestic demand and investments, despite global headwinds like US tariffs. India’s Economic Survey presents the gems and jewellery sector as a critical yet complex pillar of the economy,

• Export Diversification:Indian exporters shifting from US amid declining demand; April-Nov FY26 data shows gems & jewellery US exports down 44.3% (US share from 33.7% to 18.7%), offset by overall export growth of 0.6%; UAE/Hong Kong now 53.6% share (UAE +34.9%, Hong Kong +23.4%); gains in Bahrain, Saudi Arabia (gold jewellery), Canada/Mexico/China (precious stones), boosted by India-UAE CEPA and India-UK FTA progress.

Gems & Jewellery Sector Performance: Total merchandise exports steady at $437.7B; non-petroleum/non-G&J exports up 7.5% to record $374.3B (79% of basket); G&J hit by global demand cycles, gold/diamond price volatility, geopolitics; imports up 6.3% to $721.2B, with gold imports +27.4% (38.2% price rise), widening trade deficit to $283.5B (+17.6%).

Gold’s Dual Role in Finance: Gold loans surged 125.3% YoY (Nov 2025) amid high prices/liquidity needs; MSME guidelines now allow voluntary gold/silver jewellery collateral, expanding credit access; however, microfinance data gaps on gold liabilities hinder assessments; strengthens reserves (gold holdings $78.2B to $117.5B) but flags inflation risks.

Inflation and CAD Pressures: Precious metals drive core inflation wedge (~235 bps); excluding gold/silver, core inflation at 2.3-2.4% vs. 4.6%; high gold demand fuels CAD imbalances due to import reliance, positioning G&J as both economic enabler (lending, diversification) and constraint (volatility, deficits).

Force enabler and constraint :The Economic Survey 2026 portrays India’s gems and jewellery (G&J) sector as a dual-force enabler and constraint. As an enabler, it bolsters financial stability through gold-backed lending surging 125.3% YoY, expands MSME credit via jewellery collateral, drives FTA-led diversification (e.g., UAE exports +34.9%), builds gold reserves to $117.5B, and acts as a financial stabiliser. Conversely, as a constraint, it faces export volatility from demand/price swings softening overall growth, geopolitical/consumer sensitivities, gold imports up 27.4% exacerbating CAD pressures, and lifting core inflation by ~235 bps—highlighting the need for balanced policies amid Trump tariffs and global shifts.

Implications for Trump Tariffs: US trade deal progress noted, but tariffs accelerate diversification to Middle East/Europe/Africa/Asia; textiles likely similarly impacted (export shift implied); G&J’s resilience via FTAs positions India as stable hub, though sustained gold imports demand policy focus on duties, incentives for competitiveness.

Source: GJEPC