India and the United States have finalized an interim trade framework that significantly eases the pressure on Indian exporters. A wide list of Indian goods that were facing effective duties close to 50% in the US will now attract only 18%.Gems and jewellery clusters, especially in Gujarat and Maharashtra, employ millions. Zero tariffs in the US market make Indian diamonds and gemstones more competitive against rivals such as Belgium and the UAE.

After a tumultuous period where exports to key markets like the US plummeted by over 60% for cut and polished diamonds, this policy shift is set to restore India’s competitive edge. By removing financial barriers, the government has provided the necessary “booster dose” to revive Surat’s processing hubs, safeguard millions of livelihoods, and accelerate the mission of Aatmanirbhar Bharat.

1. The Crisis: A 60% Decline in Trade

India is the global leader in diamond processing, with 9 out of 10 diamonds in the world being cut and polished in Surat. However, the sector recently faced a “near-collapse” due to:

• Punitive Tariffs: Duties in the US—India’s largest market—surged from 0% to 50% in late 2025, making Indian exports unviable.
• Export Slump: The impact was immediate, with cut and polished diamond exports dropping from $3.6 billion to $1.4 billion (a decline exceeding 60%).
• Socio-Economic Strain: The downturn led to factory closures, wage cuts, and severe distress for the nearly 1 million artisans employed in the sector.

2. The Strategic Breakthrough

The waiver of tariffs is a result of high-level negotiations by the Ministry of Commerce and the Indian Government. Key highlights of the recent trade agreements include:

• India-US Trade Pact: Reciprocal tariffs on various goods have been capped or eliminated, with industry leaders optimistic that loose diamonds and colored gemstones will now enjoy zero-duty access under Annexure 3 of the reciprocal list.
• European Union FTA: Complementing the US deal, the India-EU FTA has granted zero-duty access for gems and jewellery, helping India diversify its market away from a single-country dependence.

3. Impact on the Sector: Reinstating the Spark

The removal of trade barriers is expected to catalyze a sharp revival in 2026:

• Restored Competitiveness: India now stands on a level playing field with competitors like Thailand and Vietnam.
• Liquidity & Margins: Lower tariffs ease the strain on working capital and improve margins for MSMEs, which comprise 80% of the industry.
• Revival of Rural Economies: The boost will help reopen units in the Saurashtra region, bringing stability to the artisan workforce.

4. Alignment with Aatmanirbhar Bharat

This move goes beyond mere trade statistics; it is a foundational step toward a self-reliant India:

• Value Addition: By processing rough diamonds and exporting high-value finished goods duty-free, India maximizes foreign exchange inflows.
• Global Hub Status: It reinforces the Surat Diamond Bourse and SEEPZ Mumbai as the world’s primary destination for jewellery manufacturing.
• MSME Empowerment: The removal of caps on courier exports and duty-free import of Lab-Grown Diamond (LGD) seeds further empowers local manufacturers to lead in the high-tech synthetic diamond market.