What Happened
- The India-US Interim Trade Framework, finalised on February 7, 2026, during Prime Minister Modi's visit to Washington, includes a commitment to reduce or eliminate US duties on Indian gem and jewellery exports.
- Under the framework, the US agreed to zero duty on Indian cut-and-polished natural diamonds and coloured gemstones once the formal trade agreement is concluded; in the interim, reciprocal tariffs have been reduced from 50 per cent to 18 per cent.
- India's cut and polished diamond exports to the US fell sharply from $3.64 billion (April–December 2024) to $1.45 billion (April–December 2025), partly due to the earlier 50 per cent tariff burden.
- The overall India-US Interim Trade Framework covers sectors including gems, jewellery, pharmaceuticals, machinery, apparel, and textiles, with a uniform reciprocal tariff of 18 per cent replacing higher earlier rates.
- India's gems and jewellery sector exported $23.19 billion in the April 2025–January 2026 period; the industry body GJEPC called the framework a relief measure that "sets the stage for recovery."
- The rollback is projected to add up to $3 billion in near-term export revenues to India's gem and jewellery sector.
Static Topic Bridges
India's Gem and Jewellery Sector: Profile and Export Significance
India's gem and jewellery sector is one of the country's largest export industries and a major employer. India processes over 90 per cent of the world's cut and polished diamonds by volume, with Surat (Gujarat) as the global hub for diamond cutting and polishing. The sector contributes approximately 10 per cent of India's total merchandise exports and employs around 4.3 million people directly, with significant indirect employment. The Gem and Jewellery Export Promotion Council (GJEPC) is the apex industry body, established in 1966 and supported by the Ministry of Commerce and Industry. The US is India's largest single-country export destination for gems and jewellery.
- India's global position in diamonds: processes >90% of world's cut and polished diamonds by volume
- Gem and jewellery's share in India's merchandise exports: ~10%
- Employment: ~4.3 million direct jobs
- FY 2024-25 total gem and jewellery exports: ~$28.5 billion (declined 11.72% YoY)
- FY 2023-24 total: ~$32.2 billion
- April 2025–January 2026 exports: $23.19 billion
- Hub city for diamond processing: Surat, Gujarat
- Industry body: GJEPC (Gem and Jewellery Export Promotion Council), Ministry of Commerce and Industry
- US market: largest single-country destination for Indian gem and jewellery exports
Connection to this news: The US duty reduction directly addresses the cost competitiveness of Indian gems and jewellery in the American market. A reduction from 50 per cent to 18 per cent reciprocal tariff (and ultimately zero for diamonds and gemstones) substantially improves the price advantage of Indian exports.
India-US Trade Relations and Tariff Frameworks
The United States is India's largest bilateral trading partner, with two-way goods and services trade exceeding $190 billion annually. However, trade relations have been periodically strained over tariff and market access issues. In 2019, the US removed India from the Generalised System of Preferences (GSP) — a preferential tariff programme that gave Indian exports duty-free access to the US market in exchange for meeting certain conditions. In 2025, the Trump administration imposed steep reciprocal tariffs on Indian goods (up to 50 per cent), arguing that India maintains high tariff barriers. The February 2026 Interim Trade Framework represents a bilateral negotiated reduction — with the US cutting its reciprocal tariff to 18 per cent and India expected to provide compensatory market access concessions. A full bilateral Free Trade Agreement (or Comprehensive Economic Partnership Agreement) remains under negotiation.
- India-US bilateral goods + services trade: >$190 billion per year
- US India's position: largest bilateral trading partner for India
- GSP removal: 2019 (US removed India from Generalised System of Preferences)
- Trump tariffs on India (2025): up to 50 per cent reciprocal tariff
- Interim Trade Framework (Feb 7, 2026): tariff reduced to 18% for most Indian goods; zero duty commitment for natural diamonds and gemstones pending final agreement
- Additional 25% punitive tariff: fully removed/rescinded under framework
- Sectors covered: gems, pharma, machinery, apparel, textiles
- Projected additional exports (gem/jewellery sector): up to $3 billion in near term
- Status: Interim framework — full FTA/CEPA negotiations ongoing
Connection to this news: The duty cut is not a permanent FTA provision but an interim framework. The gem and jewellery sector benefits most directly because it had faced the steepest tariff shock in 2025 and is now positioned for export recovery under the reduced 18 per cent rate.
Trade Policy Instruments: Tariffs, GSP, and Their Impact on Exports
A tariff (customs duty) is a tax imposed by an importing country on goods entering from abroad. Tariffs serve multiple purposes: revenue generation, protection of domestic industries, and as leverage in trade negotiations. From an exporting country's perspective, the higher the tariff in the destination country, the less competitive the exports become. The Generalised System of Preferences (GSP) allows developed countries to grant preferential (lower or zero) tariffs to developing country exports, unilaterally and non-reciprocally, to support their economic development. India benefited from the US GSP until 2019, when it was withdrawn — a move that raised effective duties on Indian goods including gems, textiles, and engineering products. Reciprocal tariff frameworks, unlike GSP, are negotiated bilateral arrangements where both sides grant each other concessions.
- Tariff types: Ad valorem (% of import value), specific (per unit), compound (combination)
- GSP: Unilateral, non-reciprocal preferential duty concession by developed countries for developing nations; WTO-consistent under the Enabling Clause
- US GSP for India: In force until 2019; India's benefits included zero duty on gems, textiles, some engineering goods
- India removed from GSP: June 2019 (US cited India's failure to provide "equitable and reasonable market access")
- Impact: ~$6.3 billion worth of Indian exports lost GSP benefits in 2019
- Reciprocal tariff: bilateral, negotiated, unlike GSP (requires concessions from both sides)
- Current interim framework: 18% reciprocal tariff replaces earlier 50% Trump tariff; zero duty for natural diamonds/gemstones upon conclusion of formal agreement
Connection to this news: The path from 50% tariff → 18% reciprocal tariff → eventual zero duty for diamonds and gemstones represents a staged restoration of some GSP-era benefits through bilateral negotiation, with the gem and jewellery sector as one of the prime beneficiaries.
Key Facts & Data
- India-US Interim Trade Framework finalised: February 7, 2026
- Previous US tariff on Indian goods: up to 50% reciprocal + 25% additional punitive
- New reciprocal tariff under framework: 18%
- Zero duty commitment: cut-and-polished natural diamonds and coloured gemstones (upon conclusion of full agreement)
- India's gem and jewellery exports Apr 2025–Jan 2026: $23.19 billion
- Diamond exports to US: fell from $3.64 billion (Apr–Dec 2024) to $1.45 billion (Apr–Dec 2025)
- Projected additional exports from duty cut: up to $3 billion (near term)
- India's total gem and jewellery exports FY 2024-25: ~$28.5 billion (−11.72% YoY)
- India's share in global diamond processing: >90% by volume
- Employment in gem and jewellery: ~4.3 million jobs
- Industry body: GJEPC (since 1966), Ministry of Commerce and Industry
- US GSP for India: withdrawn June 2019