Economic slowdown and a declining demand for jems and jewellery in countries such as the US, Europe and Japan will hit the industry's exports, the review of the economy for the year 2008-09 said.
"Specific export-intensive manufacturing sectors such as gems and jewellery could be strongly affected", it said.
The report said a major concern is the slowdown in OECD countries, which is turning into recession with growth estimates of the US, EU and Japan being revised downwards virtually every month since September 2008.
"This will have a negative effect on imports of these countries and consequently on exports of emerging economies," it said.
In fact, Christmas orders from the US and Europe have gone down 15-25% according to these countries' industry leaders. Although the declining trend begun well before the Christmas season, the past eight months have seen lower orders with more cancellations.
The manufacturing segment saw exports of cut and polished diamonds dip 20.18% over the same period last year. The country's gems and jewellery exports stood at $20.88 billion for 2007-08, up 22.27% over $17.08 billion the previous year.
Following the global financial meltdown, the country's exports, for the first time in seven years, dipped over 12% in October. Also, India's total exports fell about 10% in November, on a negative trail for the second month in a row this year, following the US and European markets recession.
Several developed markets including the US, the UK, Japan and other countries in the Eurozone, which are India's major export destinations, are officially in recession. The government and the RBI have taken several steps, including making available cheap credit to exporters, to boost the sector.
