Lab-grown diamonds challenge tradition, reshape jewellery market

Affordability, sustainability and changing trends fuel demand

By 2030, India’s apex body, the Gems and Jewellery Export Promotion Council (GJEPC), predicts that the country’s gem and jewellery market will reach USD 130 billion. Amid the sector's growth, lab-grown diamonds are rapidly gaining prominence. According to a Vantage Market Research report, the lab-grown diamond market, valued at USD 2.61 billion in 2023, is projected to reach USD 8.31 billion by 2032, growing at a Compound Annual Growth Rate (CAGR) of 13.73 pc.

In Indian society, diamonds have long held significant cultural importance, symbolising wealth, purity, and prosperity. Often worn on special occasions, they have thrived on the allure of rarity, the promise of eternity, and the weight of tradition. As a result, according to the Gems and Jewellery Export Promotion Council (GJEPC), India’s gem and jewellery market is currently valued at USD 85 billion and is projected to reach USD 130 billion by 2030.

However, amid this promising growth, a disruption is shaking the very foundations of this thriving industry. Lab-grown diamonds, once dismissed as mere synthetic imitations, are now emerging as a formidable alternative to their mined counterparts. With advancements in technology, these diamonds, chemically identical to natural ones are rapidly gaining consumer acceptance.

A market on the rise

According to a report by Technopak, a consultancy, the lab-grown diamond industry grew by 14.3 pc in 2023, more than double the growth rate of 6 pc in 2020, and is expected to capture over 21 pc of the total diamond market by 2025. In India, where jewellery is deeply ingrained in culture and tradition, the market for lab-grown diamonds valued at USD 2.61 billion in 2023, is projected to reach USD 8.31 billion by 2032, a Compounded Annual Growth Rate (CAGR) of 13.73 pc. According to jewellers, factors such as affordability, sustainability, and lower entry barriers have contributed to the rapid rise of lab-grown diamonds.

According to Varun Kohli, a jeweller in Delhi’s Karol Bagh, affordability is the single biggest factor behind this surge.

“Lab-grown diamonds are gaining market share, and it is only going to keep growing. There is no visual difference between them and natural diamonds, so why wouldn’t customers choose to pay less, sometimes just a tenth of the price or even lower? In a price-sensitive market like India, this shift is happening even faster than in the West,” Kohli tells Media India Group.

Changing consumer preferences

Beyond affordability, a shift in consumer behaviour, and its indistinguishable quality from its natural counterparts are fuelling demand for lab-grown diamonds, notes Kashish Babber , another jeweller based in Vikaspuri in West Delhi.

“The demand for lab-grown diamonds is soaring for three main reasons. First being affordable, they offer luxury without the steep price. Second, their quality is identical to natural diamonds, visually and structurally and they come with GIA certification for Cut, Colour, and Clarity, ensuring trust,” Babber tells Media India Group.

Moreover, jewelleries is no longer seen solely as an investment but as a fashion statement, with buyers increasingly looking to refresh their collections with trendy pieces. Much like fast fashion, the affordability of lab-grown diamonds enables more frequent purchases, making them an attractive choice and further driving their popularity.

Additionally, the demand for customisation has also seen a significant rise as many buyers now seek unique and personalised pieces rather than traditional sets passed down through generations, hence this flexibility of lab-grown diamonds allows jewellers to offer these custom designs at a fraction of the cost, further boosting their appeal.

However, ethical concerns are also playing a crucial role in shaping consumer preferences, as the traditional diamond industry has long been associated with environmental degradation and conflict mining. Many consumers, especially in urban India, are becoming more conscious of the impact their purchases have on the planet. As a result, lab-grown diamonds, which require significantly less land and energy to produce, are increasingly being viewed as a sustainable alternative.

Bindu Shah, a retired teacher and jewellery enthusiast from Mumbai, is one such customer who wants her diamonds to be environmentally friendly.

“I find lab-grown diamonds more doable because they are environmentally friendly, ethically sourced, and more affordable while maintaining the same physical and chemical properties as mined diamonds,” Shah tells Media India Group.

Resistance from traditional jewellers

Despite their growing popularity, lab-grown diamonds face skepticism within the jewellery industry. Many traditional jewellers are still reluctant to embrace this shift, with some believing it to be a passing trend.

“Most jewellers still have no idea what is about to hit them, they are holding onto the hope of a revival in natural diamonds, but this a personal bias that benefits them. The reality is that lab-grown diamonds offer a nearly identical visual experience at a fraction of the cost, sometimes as low as one-tenth of the price,” adds Kohli.

The economic realities of lab-grown diamonds also challenge the business models of traditional jewellers. Unlike natural diamonds, which have historically been associated with high margins, lab-grown diamonds operate in a more competitive price range, reducing profit margins for sellers.

However, as demand continues to rise, some are beginning to reconsider this impending change.

“The ease of growing diamonds in a lab versus mining them naturally means that production costs are lower. But so are the profit margins for jewellers compared to natural diamonds. Family-run businesses like ours are still weighing how much to invest in this segment,” adds Babber.

Limitations Of lab-grown diamonds

Despite the growing popularity of lab-grown diamonds in recent years, they still face certain challenges. Factors such as market perception and consumer awareness continue to pose hurdles. While lab-grown diamonds offer affordability and sustainability, some buyers remain hesitant due to concerns about long-term value and widespread acceptance in the luxury market.

“Even though the industry is growing, lab-grown diamonds still have some limitations. Some buyers feel they lack the prestige and rarity of natural diamonds, and there are also some restrictions in size and colour variations,” admits Babber.

Another key limitation that plagues lab-grown diamonds is resale value. Unlike natural diamonds, which have a long history of appreciating over time, lab-grown diamonds depreciate more rapidly due to mass production.

“The biggest limitation in the lab-grown industry is its buy-back policy. Indian consumers always ask for the resale value before buying a product, and this hits the diamond industry hard. Even though lab-grown diamonds are affordable, customers still want a buy-back option which becomes a challenge for store owners,” adds Babber.

Meanwhile, according to the economic think tank Global Trade Research Initiative (GTRI), the Indian lab-grown diamond industry in 2024 faced significant challenges, including falling prices due to production overcapacity and an oversupply driven by imports. This has eroded consumer trust and made it difficult for manufacturers to repay loans taken for purchasing lab-grown diamond machines.

However driven by affordability, sustainability, and evolving consumer preferences, lab-grown diamonds are rapidly reshaping India’s jewellery market, While challenges like market perception and resale value persist, growing awareness and technological advancements are pushing them toward mainstream acceptance. As the industry adapts, lab-grown diamonds are set to play a crucial role in the future.