Dubai: Diamond demand will grow more than 6 percent per year through 2020, far outpacing the 2.8 percent annual supply growth, a report has said.

"A doubling in the ranks of the Chinese and Indian middle classes by 2020 will drive much of the demand surge, with their combined market share projected to reach 30 percent by the end of the decade, up nearly half from its current levels and nearly equal to the share of the US," said the 2011 Global Diamond Industry Report released by Bain & Company.

The report forecasts a strong positive outlook for the USD 60 billion diamond jewellery industry. Bain predicts that by 2020 annual production will swell to nearly 175 million carats and surpass peak 2007 pre-crisis production levels.

"The appetite for high-quality diamonds in China and India is growing," said Gerhard Prinsloo, Bain & Company partner and lead author for the report, "but industry players would be ill-advised to take their eye off of the US and its preeminent position as the world's No 1 diamond market."

The report finds that industry efforts to improve transparency could finally enable the diamond market to overcome past hurdles—including difficulties with valuation, the lack of a traded market, and lack of liquidity—and establish diamonds as a full-fledged investment asset.