Gem and jewellery export rises 4% in Feb. amid tariffs

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UPSC Study Note: Gem & Jewellery Exports — India's Resilience Amid U.S. Tariff Headwinds

1. At a Glance

• India's gem and jewellery (G&J) sector is one of the country's largest foreign-exchange earners, contributing ~7–8% of total merchandise exports. [S1]
• February 2026 data from the Gem & Jewellery Export Promotion Council (GJEPC) showed gross exports grew 3.86% YoY in USD terms (8.37% in rupee terms) to $2.68 billion (₹24,340.05 crore). [S1]
• The sector is strategically significant for employment (4.64 million workers) and as a SME-dominated, labour-intensive industry — directly relevant to GS-III (Indian Economy) and GS-II (Government Policy).
• The U.S. tariff regime under President Donald Trump imposed heavy duties on Indian goods; the G&J sector's resilience despite this headwind is a key UPSC angle. [S1][S2]

2. Why in the News

• March 17, 2026 (The Hindu BusinessLine): GJEPC released export data showing G&J exports grew ~4% in February 2026 despite elevated U.S. tariffs. [S1]
• For April 2025 – February 2026 (11 months of FY 2025-26): cumulative gross exports were $25.93 billion (₹2,28,230.06 crore), a marginal YoY rise of 0.07% in USD but 4.34% in rupee terms. [S1]
• The India-U.S. interim trade deal framework (early February 2026) proposed zero-duty access for diamonds and coloured gemstones to the U.S. — a turning-point for the sector. [S2]
• U.S. tariff burden on G&J was expected to fall from ~50% to 18% under the interim agreement; jewellery duties reduced to 18% with loose diamonds headed toward zero. [S2]
• Surat diamond industry had been significantly stressed — cut and polished diamond exports to the U.S. fell over 60%, from $3.64 billion to $1.45 billion, due to tariff-driven competitiveness loss. [S2]

3. Background & Evolution

• Ancient roots: India has been a global gem-cutting and jewellery-making hub for millennia; Surat (Gujarat) and Mumbai are modern epicentres for diamonds; Jaipur for coloured stones; Chennai and Thrissur for gold jewellery.
• 1966: GJEPC established under the Foreign Trade (Development & Regulation) Act by the Ministry of Commerce & Industry to promote exports; it is a statutory body acting as the apex trade promotion organisation for the sector. [S1]
• 1990s liberalisation: Removal of quantitative restrictions and reduction of import duties on gold enabled organised jewellery manufacturing and export.
• SEZ & cluster policy: Dedicated Special Economic Zones (e.g., SEEPZ, Mumbai; Gems & Jewellery SEZ, Hyderabad) boosted value-added exports.
• National Jewellery Policy / India Gem & Jewellery National Policy: Government has periodically reviewed hallmarking, import duties, and GST rates to support the sector.
• 2020–22 COVID disruption: Sector witnessed sharp export contraction, followed by a strong rebound in FY 2022-23.
• FY 2024-25 onward: Rising U.S. tariffs under Trump's second term and geopolitical tensions (Russia-Ukraine, Middle East) created fresh headwinds; lab-grown diamonds (LGDs) simultaneously disrupted the natural diamond segment.

4. Core Static Facts

5. Multi-Dimensional Analysis

Economic

• G&J is a net foreign exchange earner ($25.93 bn cumulative in 11M FY26) and crucial to India's current account deficit management. [S1]
• The rupee depreciation effect is visible: even when USD exports were near-flat (+0.07%), INR-denominated exports grew 4.34% — highlighting exchange-rate sensitivity. [S1]
• Lab-grown diamonds (LGDs) are disrupting natural diamond pricing; India is simultaneously a leading producer of LGDs (Surat), presenting a structural transition challenge and opportunity.
• Potential zero-duty U.S. access for diamonds under the India-U.S. trade framework could reverse the 60%+ fall in CPD exports, significantly boosting sectoral GDP contribution. [S2]

Geopolitical / Strategic

• The India-U.S. interim trade deal (Feb 2026) is the primary geopolitical lever for G&J recovery; India's ability to secure sector-specific carve-outs demonstrates strategic trade diplomacy. [S2]
• 44 new tariff lines created in Budget 2026 to map U.S. market access signals India's systematic approach to bilateral trade re-architecture. [S3]
• Geopolitical disruptions (Russia-Ukraine, Israel-Hamas conflict) have affected diamond supply chains (Antwerp routing) and consumer sentiment in key markets. [S1]
• GJEPC is advocating for inclusion of laboratory-grown diamonds and synthetic gemstones in the U.S. tariff exemption list — a forward-looking diplomatic push. [S2]

Social / Labour

• Sector employs ~4.64 million workers, predominantly from artisan communities in Gujarat, Rajasthan, Maharashtra, and Tamil Nadu — large-scale livelihood implications.
• Surat's diamond polishing industry employs workers from Saurashtra region (many migrant labourers); the 60%+ fall in CPD exports directly translates to worker distress. [S2]
• Gender dimension: Gold jewellery manufacturing employs significant numbers of women artisans, especially in South India.

Environmental

• Mining of natural gemstones raises concerns over land degradation, water use, and conflict minerals (though India largely processes imported rough diamonds, not mines them domestically).
• Lab-grown diamonds present a lower environmental footprint per carat than mined diamonds, but energy-intensive CVD/HPHT production requires clean energy transition.
• Responsible Jewellery Council (RJC) standards and Kimberley Process Certification Scheme (KPCS) compliance required for conflict-diamond-free certification — India is a KPCS signatory.

Administrative / Governance

• GJEPC functions as a tripartite body: government, exporters, and trade associations — a model of co-operative export promotion.
• India's Hallmarking regime (BIS mandatory hallmarking for gold jewellery since 2021) improves product credibility but compliance remains uneven in small units.
• The mismatch between USD stagnation and INR growth in export figures points to the need for exchange-rate risk hedging frameworks for MSMEs.

6. Recent Developments (Last 12–18 Months)

• February 2026: India-U.S. interim trade framework announced; jewellery tariffs to fall to 18%, loose diamonds toward zero duty — GJEPC termed it a "turning point." [S2]
• February 2026: India created 44 new tariff lines in Union Budget 2026 to specifically map U.S. market access for strategic goods. [S3]
• February 2026: U.S. lifted extra 25% tariffs after India pledged steps on Russian oil imports — part of broader tariff recalibration environment. [S3]
• March 2026: GJEPC released February 2026 data showing $2.68 bn gross exports (+3.86% YoY), described as "relief" amid tariff headwinds. [S1]
• March 2026: Business Standard reported Surat diamond industry stress — CPD exports to U.S. fell from $3.64 bn to $1.45 bn due to tariff-driven loss of competitiveness. [S2]
• FY 2025-26 (Apr–Feb): Cumulative G&J exports $25.93 bn, near-flat in USD but growing in INR, demonstrating sector resilience. [S1]
• 2025 (ongoing): Lab-grown diamond segment growing rapidly; GJEPC pushes for LGD inclusion in U.S. tariff exemption scope. [S2]

7. Prelims Hooks

1. GJEPC was established in 1966 under the Ministry of Commerce & Industry as India's apex gem and jewellery export promotion body. [S1]
2. India's gross G&J exports in February 2026 were $2.68 billion, a rise of 3.86% YoY in USD terms. [S1]
3. In rupee terms, the same February 2026 rise was 8.37% YoY — higher than USD growth due to rupee depreciation. [S1]
4. GJEPC Chairman (2026): Kirit Bhansali. [S1]
5. Cumulative G&J exports for April 2025 – February 2026 stood at $25.93 billion (₹2,28,230.06 crore). [S1]
6. The U.S. effective tariff burden on Indian gems and jewellery was approximately 50% before the India-U.S. interim trade deal. [S2]
7. Under the India-U.S. interim trade framework (2026), jewellery tariffs were reduced to 18% and loose diamonds moved toward zero duty. [S2]
8. India's cut and polished diamond (CPD) exports to the U.S. fell over 60% — from $3.64 billion to $1.45 billion — due to Trump tariffs. [S2]
9. Surat (Gujarat) is India's primary hub for cut and polished diamonds; Jaipur (Rajasthan) is the hub for coloured gemstones. [Background]
10. SEEPZ (Mumbai) is India's premier Special Economic Zone for gems and jewellery exports. [Background]
11. Kimberley Process Certification Scheme (KPCS) — India is a signatory; certifies diamonds as conflict-free. [Background]
12. GST on gold jewellery: 3%; on rough/semi-precious stones: 1.5%. [S4]
13. BIS mandatory hallmarking for gold jewellery in India was made compulsory from 2021. [Background]
14. India's G&J sector employs approximately 4.64 million workers (direct and indirect). [Background]
15. G&J accounts for roughly 7–8% of India's total merchandise exports. [Background]

8. Mains Relevance

GS Paper(s): Primarily GS-III (Indian Economy — trade, exports, industry); secondary relevance to GS-II (India-U.S. bilateral relations, trade diplomacy).

Syllabus headings: - GS-III: Indian Economy — mobilisation of resources, growth, development and employment; effects of liberalisation on the economy; changes in industrial policy; infrastructure: energy, ports, roads, airports, railways. - GS-III: Export strategies; bilateral and regional trade agreements. - GS-II: Effect of policies and politics of developed and developing countries on India's interests.

Plausible Mains Question Stems: 1. "India's gem and jewellery sector has demonstrated resilience amid global tariff disruptions. Analyse the structural strengths and vulnerabilities of this sector in the context of India's export strategy." (GS-III, 15 marks) 2. "Examine how the India-U.S. interim trade framework of 2026 is likely to reshape India's gem and jewellery export landscape. What policy measures should India adopt to consolidate these gains?" (GS-II/III, 15 marks) 3. "The rise of lab-grown diamonds presents both a threat and an opportunity for India's traditional gem and jewellery industry. Critically evaluate." (GS-III, 10 marks)

9. Related Topics to Study Next

1. India-U.S. Bilateral Trade Relations (2024-26) — The tariff framework directly determines G&J export competitiveness; understanding the broader trade deal is essential. [S2][S3]
2. Kimberley Process Certification Scheme (KPCS) — India's role in the global conflict-diamond regime; relevant for GS-II (international bodies) and GS-III (mineral exports).
3. Lab-Grown Diamonds (LGDs) — Surat's pivot to LGDs is disrupting the global diamond market; links to science & technology (GS-III) and India's manufacturing ambitions.
4. Special Economic Zones (SEZs) Policy — SEEPZ and sector-specific SEZs underpin G&J export infrastructure; key for GS-III.
5. BIS Hallmarking and Consumer Protection — Gold hallmarking regime links to consumer protection law and quality standards; GS-II/III interface.
6. Foreign Trade (Development & Regulation) Act, 1992 — Statutory backbone of India's export promotion bodies including GJEPC.
7. India's Merchandise Exports & Current Account Deficit — G&J is a major forex earner; contextualise within India's BoP framework (GS-III).
8. Make in India & MSME Policy for Artisan Sectors — G&J is predominantly MSME-driven; links to employment and industrial policy.

10. Common Errors / Trap Areas

1. GJEPC ≠ Ministry of Finance body — GJEPC is under Ministry of Commerce & Industry, NOT Finance. Aspirants often confuse export councils with RBI/Finance oversight.
2. "4% growth" is in USD terms — In rupee terms the same February 2026 growth was 8.37%. The rupee-USD divergence is a common MCQ trap; always note the denomination.
3. Cumulative FY26 growth ≠ February growth — Monthly data (3.86%) and annual cumulative data (0.07% USD / 4.34% INR for Apr–Feb) are different; confusing the two is a trap in data-based questions.
4. Surat is a diamond hub, NOT a gold jewellery hub — Gold jewellery manufacturing is centred in Chennai, Mumbai, and Thrissur; Surat and Navsari focus on cut and polished diamonds. A common geography trap.
5. KPCS ≠ GJEPC — The Kimberley Process is an international multilateral scheme for conflict-diamond certification; GJEPC is an Indian domestic export council. Do not conflate their roles or jurisdictions.

11. Sources

• [S1] "Gem and jewellery export rises 4% in Feb. amid tariffs" — The Hindu BusinessLine, March 17, 2026 — https://www.thehindu.com/todays-paper/2026-03-17/th_international/articleG8HFNNEFS-13886555.ece — (Tier 4; direct article content as primary source)
• [S2] "Zero-duty US access for diamonds, coloured gems a 'turning point': Industry" — Business Standard, February 2026 — https://www.business-standard.com/industry/news/zero-duty-us-access-for-diamonds-coloured-gems-a-turning-point-ind-inc-126020700883_1.html — (Tier 4)
• [S3] "India creates 44 tariff lines in Budget 2026 to map US market access" — Business Standard, February 2026 — https://www.business-standard.com/amp/economy/news/india-creates-44-tariff-lines-in-budget-2026-to-map-us-market-access-126021301630_1.html — (Tier 4)
• [S4] Background knowledge on GST rates and hallmarking from publicly available Government of India notifications (cross-verifiable via cbic.gov.in / pib.gov.in).

Note to aspirant: The India-U.S. tariff negotiations are fluid (mid-2026). Always update this note with the latest GJEPC monthly releases and Ministry of Commerce press notes before the exam.