Impact of U.S. Tariffs on Jewellery Sector 

Syllabus :GS3/Economy 

In News

• India’s diamond and jewellery sector has been severely impacted by U.S. tariffs of 50% on cut and polished diamonds and 50-57% on studded and non-studded jewellery, disrupting decades of established trade. 

About

• The U.S. is India’s largest diamond importer, with exports worth ₹46,000 crore in diamonds and ₹23,000 crore in studded gold jewellery in 2024-25.
• The cut and polished diamond industry employs 8.2 lakh skilled workers. 

Issues and Challenges

• India’s gem and jewellery export industry is facing a major challenge due to steep U.S. tariffs, which make Indian products less competitive compared to rivals like Turkey, Vietnam, and Thailand. 
• India risks losing its strategic position as a top supplier, as trade could shift to low-tariff countries such as Mexico, Canada, UAE, Oman, and Turkey.
• Industry experts warn that ongoing issues like high gold prices, geopolitical tensions, and unstable metal markets add to the uncertainty.

Various Demands 

• The industry seeks urgent government intervention, including short-term policy reliefs like extending export obligation periods from 90 to 270 days, allowing SEZs to sell in the domestic market without import duty, and permitting reverse job work to keep factories operational and workers employed.
  • Additionally, monetary incentives such as interest subvention, export subsidies, worker aid (loan restructuring, healthcare), and marketing support for exploring new markets are demanded.

Governments Steps 

• The Government has undertaken various measures recently to promote investment and upgrade technology and skills to promote ‘Brand India’ in the international market. 
• The Government has permitted 100% FDI in the sector under the automatic route, wherein the foreign investor or the Indian company do not require any prior approval from the Reserve Bank or the Government of India. 
• The Indian Government also signed a Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates (UAE) in March 2022.
• In Union Budget 2025-26, the customs tariff on jewellery (HSN code 7113) was reduced from 25% to 20% and on platinum findings from 25% to 5%, making jewellery more affordable and boosting domestic demand.

Conclusion and Way Forward 

• India’s Gems & Jewellery sector is poised for strong growth, driven by the rise of large retailers and organised brands that offer greater product variety and design options. 
• Relaxed gold import restrictions, improved gold availability, reintroduced low-cost gold loans, and stabilising gold prices are expected to boost volume growth in the short to medium term. 
• While domestic demand during festive and wedding seasons may offer some relief, the export sector’s future depends heavily on India-U.S. trade negotiations and timely government action to prevent long-term damage.

Source :TH