Although the demand for lab-grown diamonds has been continuously increasing in India, industry analysts predict that naturally mined diamonds will continue to sparkle for a very long time.

India presently boasts the highest young population in the world. According to analysts who spoke with CNBC, the price point of the so-called LGDs has drawn in an increasing number of millennial and Gen Z shoppers.

Despite being chemically equivalent, lab-grown diamonds can be five times less expensive than genuine diamonds.

One of the biggest LGD jewellery companies in India, Limelight Diamonds, claims that a genuine diamond costs about $6,000 per carat, whereas an LGD diamond costs only $1,200.

The four Cs—clarity, colour, cut, and carat—which are generally acknowledged as the standard features to assess a diamond’s worth and quality—are also used to grade both.

Due to the fact that customers in India who were previously unable to afford diamonds now believe they can enter the market, sales of LGDs have increased dramatically. “Previously, less than 5% of Indian women were able to afford natural diamonds,” said Pooja Sheth, founder and managing director of Limelight Lab Grown Diamonds.

“But consumers are feeling it’s more value for money to purchase a lab grown diamond and there is a huge amount of incremental demand from new purchases who have never bought a diamond before,” she commented.

China presently produces at least half of the world’s lab-grown diamonds; India is the second-largest producer.

The CEO of Edahn Golan Diamond Research and Data, Edahn Golan, expressed optimism that the country in South Asia would rank first in the near future.

Golan clarified that although China’s LGD market is larger in terms of manufacturing, it is not polishing as many stones as India. He said over the phone with CNBC, “The technology that is used in India is far more sophisticated, and has much more room for improvement over time in the future.”

“China can make more diamonds with the technology they are using, but India can make more, and make them better.”

From April 2022 to March of this year, 10,000 carats of LGD jewellery were sold, according to Limelight Diamonds. According to Sheth, the company’s sales from April to September of this year have already nearly doubled.

Sheth did, however, draw attention to the fact that many consumers do not necessarily spend less when purchasing LGDs.

“Lab grown diamonds have provided a purchasing upgrade. Even though prices are cheaper, many are not reducing their budgets,” she said.

“They are either upgrading themselves with a bigger rock, or buying a pendant and [a pair of] earrings with that.”

Prime Minister Narendra Modi gave First Lady Jill Biden a 7.5 carat stone created in India during his state visit to the White House in June, which is largely responsible for the optimism that exists in India over LGDs.

“The perception towards lab grown diamonds suddenly changed and that really altered the growth of lab grown diamond acceptance in the country,” Sheth said.

“It’s about opening up an entire segment of Indian audiences that have not been able to purchase diamonds before.”

Analysts told CNBC that despite a lot of excitement, consumers of LGDs still see the jewel as a stepping stone into the diamond industry and will probably buy natural diamonds when they have more money in the future.

“Lab-grown diamonds are now the talk of the day. But If you have enough money floating around, you’ll essentially buy a naturally mined diamond,” said Tehmasp Printer, CEO of the International Gemological Institute. 

“Millennials and Gen Zs may opt for a LGD when they want to get married, but switch to a naturally mined diamond down the road,” Printer told CNBC.

“If you have a Toyota, you’ll want to buy a lower end BMW after before you finally get a [Mercedes-Benz] S-Class. It’s a question of upgrade.”

The CEO of Paul Zimnisky Diamond Analytics, Paul Zimnisky, concurred.

According to Zimnisky, the rise of the LGD market won’t have a minor impact on sales of natural diamonds.

“Man-made diamonds represent around 20% of the total industry in the value sold. It was basically zero 10 years ago, so it has been growing rapidly on a relative basis,” he said.

“But it would be incorrect to say that that’s the reason why the diamond price is softer this year. It’s mostly a return to normalization.”

Zimnisky pointed out that when worldwide Covid limitations were abolished, jewellery consumption surged and diamond prices peaked in February 2022.

Since then, prices have decreased by 25%, according to Zimnisky’s Global Rough Diamond Index.

The demand for diamond jewellery worldwide is expected to decline to $81 billion this year from $89 billion in 2023, according to data from the analytics business. This is still more than the $75 billion that was purchased in 2019, prior to the pandemic.

Zimnisky did warn, though, that given how quickly LGDs are being made, problems could be on the horizon if gem values keep dropping.

“I think the price of retail isn’t reflective of how low the raw material prices are and the retail price for the man-made diamond will continue to go lower … that’s the risk for the lab diamond industry,” he warned, predicting that a three-carat LGD solitaire ring will soon sell “well under $1,000.”

(Adapted from CNBC.com)