Sparkling show: Surge in demand and growing acceptability are driving the shift to lab-grown diamonds

Vijay C Roy

The tagline ‘A diamond is forever’ has a romantic ring to it, but the price factor can make the wish-list intimidating for many. This Diwali, laboratory-grown diamonds (LGDs) are acquiring a sparkle of their own with growing acceptance in the domestic market. Offering a significantly lower price point while maintaining identical quality, certification, durability and uniqueness of a mined diamond, LGDs have created a new middle ground in the jewellery market.

As the name suggests, lab-grown diamonds are created in a controlled environment in a laboratory rather than being mined from earth. While science ensures precision, the human touch takes care of the cutting and polishing of the stone.

LGDs are indistinguishable from natural diamonds to the naked eye. Also, they are more environment-friendly as they have a much smaller carbon footprint. “The unique and independent personality of lab-grown diamonds as a sustainable and environment-friendly yet extremely affordable gemstone is being well accepted by millennial consumers. This is increasingly reflected in the sales of LGD-studded jewellery across India,” says Pooja Sheth Madhavan, founder and managing director of Limelight Lab Grown Diamonds Limited.

Six months back, when Jaipur-based Vikram Seth, a fourth-generation jeweller, diversified into LGDs, the reason was simple — the surge in demand in the domestic market. “We were witnessing a fall in the demand of natural diamonds, so we diversified. The choice was natural. Two years back, 5-10 per cent of the jewellers in Jaipur were retailing in LGDs, now 60-65 per cent of them are doing so,” says Seth.

The trend is not restricted to Jaipur. Chemically and optically identical to natural diamonds, lab diamonds are being adopted by jewellers across the country.

According to jewellers in the region, even high-net-worth individuals (HNIs) have taken a shine to lab-grown diamonds for self-consumption as well as for gifting purposes, especially during Diwali. LGDs earlier attracted buyers mainly in the 18-35 age group who could not afford natural diamonds. “Of the six lakh jewellers in the country, 60-65 per cent are retailing in LGDs these days from less than 10 per cent two years back. An aspiring middle class and even HNIs are buying LGDs,” says Nitin Kedia, general secretary, All India Jewellers and Goldsmith Federation.

“With the same level of cut, clarity and certification, a lab-grown diamond is the stone of the future because it comes with none of the ethical and environmental baggage a natural diamond would have,” according to Vaibhav Karnavat, founder of the Mumbai-based House of Quadri.

LGDs are cheaper than natural diamonds of comparable quality and size because they do not incur the expenses of mining, transportation and artificially created scarcity. Moreover, in the past year-and-a-half, the prices have plummeted.

The price disparity between natural diamonds and lab-grown diamonds can vary depending on the specific attributes and qualities. In general, lab-grown diamonds range between 1/5th and 1/10th the price of their natural counterparts.

According to jewellers, many natural diamond customers have switched to lab-grown diamonds for larger jewellery pieces, everyday items and gifts. This has also opened a new market of first-time diamond buyers, who can now purchase 1-2 carat stones with ease. India’s luxury sector is experiencing remarkable growth that surpasses many other nations.

To attract customers, retailers are introducing resale opportunities. For example, brands like Limelight offer 80 per cent buyback and 100 per cent exchange opportunities. This, together with the economic and environmental benefits, is proving to be successful in attracting millennial brides. With the introduction of buyback schemes and expansion of the store network, up to 60 per cent year-on-year growth is expected during this period, manufacturers add.

Though lab-grown diamonds offer more design versatility and a vastly affordable price point, they are not expected to completely replace natural diamonds in the domestic or export market. Both types of diamonds have a different appeal for varied consumer segments.

Lab-grown diamonds are seen as a complement to mined diamonds, allowing consumers to acquire aspirational pieces like matching sets of earrings, pendants or other jewellery items. Non-bridal jewellery is witnessing a significant growth. “I don’t think it will have any impact on the natural diamond market. However, it is definitely going to replace Moissanite (a rare mineral, discovered by French chemist Henri Moissan in 1893) and fashion jewellery market,” says Samarth Jaiswal, director of Omara Fine Jewellery.

The market size of lab-grown diamonds has been experiencing rapid growth. “While lab-grown diamonds represent a smaller segment of the overall market, they are gaining popularity, especially in the jewellery sector. Global sales of lab-grown diamonds have surged from less than $1 billion in 2016 to nearly $12 billion in 2022. During 2021 and 2022, the demand reached an all-time high, leading to the natural correction we face today where natural diamonds have plummeted in value,” says Shivika Poonglia, founder of Itara Jewellery.

A certain amount of credit can be attributed to an increasingly environment-conscious consumer. This shift in consumer mindset, coupled with the surge in the availability and affordability of lab-grown diamonds, has played a significant role in shaping the markets.

Seeing the demand, the Union government has decided to promote LGDs in a big way to boost the diamond industry. It has lifted the 5 per cent customs duty on LGD seeds. It has also approved a five-year research grant to the Indian Institute of Technology-Madras to encourage the indigenous production of LGD machinery, seeds and recipe. At the proposed India Centre for Lab-grown Diamond (InCent-LGD) at IIT-Madras, estimated to come up at a cost of Rs 242.96 crore over five years, research will be focused on driving indigenisation of the LGD manufacturing process.

Prof MS Ramachandra Rao, Department of Physics, IIT-Madras, who will be the principal investigator for this initiative, says, “The growing demand requires dedicated research to realise not only gem-quality diamonds, but also a plethora of electronic applications (5G/6G, magnetometry, thermal management, sensors and quantum technologies). The science and technology of diamond-growth processes are complicated to understand, and most of the machines, especially HPHT (High Pressure High Temperature), are imported. Moreover, the reactor manufacturers do not provide recipes to realise single crystal diamonds.”

The global diamond market demands bigger and pure lab-grown diamond crystals for commercial and electronic applications. “There is a need for research and development to conduct systematic studies to optimise the process parameters to grow large-volume and scalable diamond crystals of high purity, which will help India become the world leader in lab-grown diamonds,” says Prof Rao. The Indian market has long held a unique position in the global industry as a hub for cutting and polishing of diamonds. India produces approximately 3 million LGDs annually, accounting for 15 per cent of global production.

The United States of America is a significant market for Indian LGDs. As per estimates, India’s share in the global trade in 2021-22 was 25.8 per cent. However, India has to depend on other countries for the supply of critical machinery components and seeds — the raw materials for producing synthetic diamonds.

Amid a slowdown in the affluent markets for natural diamond, a plunge in prices and chaotic geopolitics, Indian diamond houses, which cut and polish nine out of 10 stones (natural diamonds), told banks in October this year that the next four months would be crucial. This has led to a spurt in the demand for LGDs and also a drop in prices of both the stones.

Trade has suffered a 30 per cent drop in prices of natural stones and dealt with an over 50 per cent slide in LGD prices in the past year. With China, the second-largest market, refusing to pick up, the trade is betting on Diwali, US Thanksgiving (November 23), Christmas and finally Valentine’s Day to push out the unsold.

Tech involved

• India is one of the leading producers of diamonds using CVD technology
• India has no knowhow in HPHT technology to grow and treat diamond crystals. The cost involved in importing HPHT machines is very high
• CVD reactor manufacturers import critical components like microwave generators, vacuum pumps & sensors. Even good-quality diamond seeds are imported
• This is the requirement that the IIT-Madras Research Group is aiming to tackle

How to differentiate

• Lab-grown diamonds are indistinguishable from natural diamonds without the use of specialised equipment
• They are chemically, optically and visually identical to mined diamonds
• Machines can be used to detect variations in growth patterns
• As a consumer, one can check for a laser-inscribed serial number engraved on the certified lab-grown diamond, which would begin with ‘LG’
• Consulting a reputed jeweller remains one of the most reliable ways to confirm a diamond’s origin, says Shivika Poonglia, founder, Itara Jewellery

Big numbers

• 3 million lab-grown diamonds are produced in India annually
• India accounts for about 15 per cent of lab-grown diamond production
• USA is a significant market for Indian lab-grown diamonds
• India’s share in global trade of LGDs in the financial year 2021-22 was 25.8 per cent