Even as the diamond jewellery demand among the American consumers in the US is stable with just three months to go for the Christmas season, all is not well with the Indian diamond industry.

For the first time since the global economic downturn in 2008, the export of polished diamonds has decreased by a staggering 42 per cent at $4.8 billion in the last four months since April-2012 compared to $8.3 billion during the same period in the previous year in 2011.

As per the latest figures published by the Gems and Jewellery Export Promotion Council (GJEPC), the volume of polished diamonds exported by the country has seen a sharp fall of about 95 per cent at 95 million carats in the last four months since April-2012 compared to 200 million carats exported during the same period in previous year.

Industry sources said the dealers and jewellery companies in US, China, Belgium and UAE are grappling with rising diamond inventories and falling prices, as the slack global economy prolongs a year-long slump. It is estimated that about $20-$25 billion worth of polished gems are in the diamond inventories.

Reason: the diamantaires indulged in a large-scale round tripping or circular trading of the polished diamonds by importing and exporting the same goods since 2009. US followed by UAE were the top destinations for round-tripping of goods.

Interestingly, the diamantaires were not in the position to import the polished diamonds in 2012 following the Central government suddenly imposing 2 per cent import duty on polished diamonds in January-2012. In 2010-11, India exported $28 billion worth of polished diamonds against the import of $20 billion worth of polished diamonds.

"The rough diamond market has experienced softened demand since the beginning of the year. The premier diamond jeweller and luxury retailer - with locations in fashion capitals from New York and Beverly Hills to Paris, Beijing and Hong Kong - estimated that market prices have dipped 8 per cent since April-2012," said a senior executive with GJEPC.

Diamond prices are still struggling to recover since falling off a cliff over a year ago, when the global economic outlook darkened suddenly, spoiling the plans of speculators who had stocked up in anticipation of a stronger economic recovery after the 2008-09 crisis.

Successive waves of the European sovereign debt crisis kept prices low and leery lenders passed higher borrowing costs on to diamantaires, the craftsmen who cut diamonds and who depend on financing for 90 per cent of their rough diamond inventory.