The gems and jewellery sector occupies an important position in India’s foreign trade because it is one of the country’s major export-oriented sectors. The statement “Gems and jewellery sector is not import oriented” needs to be understood in the context of the nature of the industry, its dependence on imported raw materials, its export performance, and its contribution to foreign exchange earnings. In a strict sense, the sector does have substantial import requirements, particularly for rough diamonds, precious metals and coloured gemstones. However, its basic orientation is towards value addition and exports rather than towards the domestic consumption of imported finished products. Therefore, it is more appropriate to describe the sector as an export-oriented, import-dependent processing industry rather than a purely import-oriented sector. India has traditionally been an important centre for the processing, cutting and polishing of diamonds and other precious stones. The country has developed considerable expertise in diamond cutting and polishing, jewellery manufacturing, designing and craftsmanship. A large part of the raw materials required by the industry is sourced from abroad, processed in India and subsequently exported to international markets. This process creates value within India and generates employment, income and foreign exchange earnings. Thus, imports in this sector are largely inputs for further production and exports rather than imports intended for direct consumption. The most important imported input for India’s gems and jewellery industry is rough diamonds. India does not possess sufficient domestic reserves of diamonds to meet the requirements of its large diamond-processing industry. Consequently, rough diamonds are imported from major diamond-producing countries and trading centres. These rough diamonds are cut and polished by Indian workers and firms and are then exported to markets across the world. This makes the diamond industry