Gems and jewellery exports declined by 12% year-on-year to $3.2 billion in May on account of weak demand in major markets like Europe.
The exports stood at $3.7 billion in the same period last fiscal, according to the data provided by the Gems and Jewellery Export Promotion Council (GJEPC).
"The demand is sluggish in traditional markets like Europe," GJEPC Chairman Rajiv Jain said.
He, however, added the US market is picking up now.
The major markets for the country's jewellery include Europe, the US, the UAE and Hong Kong.
Jain said another reason for drop in these exports was the imposition of 2% customs duty on imports of cut and polished diamonds in the budget which affected the country's diamond trading activities.
"Cut and polished diamonds were imported in a large quantity as there was no customs duty earlier. After the imposition of the duty these imports declined and led to a slowdown in trading of diamonds," he said.
After levying of the duty, the country's imports of cut and polished diamonds nosedived 82% year-on-year to $549 million in April-May this fiscal.
Exports of polished diamonds declined by about 40% year-on-year to $2.5 billion during the period.
During April-May, the overall gems and jewellery exports dropped about 16% to $5.8 billion compared to the same period last year.
They remained flat at about $43 billion in 2011-12 compared to the previous fiscal.