India is poised to become the third largest diamond market in the world, ahead of Japan and Europe by 2020, driven by rapid urbanization and a growing middle class, a report by consultancy firm Bain and Company has said.
In India, the fifth largest market for diamond jewellery after US, China, Europe and Japan, demand was driven by continued economic upturn with accelerating GDP and disposable income growth rates (7.5 percent and 9 percent in 2015 vs 7.2 percent and 6 percent in 2014). But the government’s crackdown on black money along with further rupee depreciation is likely to offset demand growth.
"We believe India has the potential to be the fastest-growing diamond jewellery market in coming years on the strength of increasing urbanization, middle-class expansion and engagement ring penetration," analysts said in the report.
"Continued depreciation of rupee could negatively affect market growth rates in US dollar terms over the short-to-medium term."
Number of middleclass households in India will be around 170 million in 2030 from about 50 million at present, the report estimated. It also said millennials across the world, including in India, will fuel the demand for diamond, despite global supply of rough diamond declining due to ageing of mines.
Although millennials in India and China rank jewellery as their number one gifting category, the way they shop for diamond make them unique. For instance, in the US, millennials use the internet for diamond jewellery shopping. In India, millennials like to visit departmental stores, while Chinese millennials prefer specialized stores, while shopping for diamond jewellery.