Buying gold and jewellery is still cheaper in Dubai than in India after New Delhi announced reducing import duty on gold and silver to 6 per cent from 15 per cent.
“Even after the reduction in import duty, it is estimated that gold prices in Dubai will still be 5-6 per cent cheaper than in India,” said Shamlal Ahamed, managing director for international operations at Malabar Gold & Diamonds.
He said residents and tourists, consisting of a global audience, prefer Dubai for their gold jewellery purchase, including Indian consumers.
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“With the reduction in import duty, price-conscious Indian customers might reconsider their preferred destination for gold shopping. However, Dubai’s status as a global jewellery hub, renowned for its diverse and unparalleled collection of jewellery designs from around the world, will remain unparalleled. This will be a critical factor in the decision-making of Indian jewellery buyers as such diversity in designs is not available in India,” said Ahamed.
Nirmala Sitharaman, India’s finance minister, announce the cut in gold and silver import duty during the Union Budget 2024-25 presentation on Tuesday.
Vijay Valecha, chief investment officer at Century Financial, also confirmed that even after a cut in the import duty, it would be cheaper to buy gold and jewellery in Dubai than in India.
Generally, industry insiders say that gold and precious metal jewellery prices were cheaper by about 15 per cent before India reduced the import duty on Tuesday.
“Retailers who purchase gold in the UAE and export it to India are bound to benefit, as historically, import duties have been a significant part of the cost,” added Valecha.
Citing an example, he said, “If a person wants to buy gold worth $100 in UAE, upon arrival in India, the same would have cost about $115 previously and $106 now, including the customs duties. However, if purchased in India, the same quantity of gold would cost about $112-115. Hence, upon comparison, gold would still be cheaper in the UAE and expensive in India.”
John Paul Alukkas, managing director of Joyalukkas Group, said the reduction in import duty has made it cheaper to buy gold in India. However, in comparison, it is still a more attractive proposition to buy gold in Dubai since it remains a competitive market due to its extensive range of options and tax-free shopping environment.
“An Indian consumer must consider travel and related expenses as well while making this purchase decision. In most cases, customers are already visiting Dubai for leisure reasons and happen to buy gold during their trip.”
Will demand drop?
Alukkas elaborated that this decrease in duty may narrow the gold price gap between India and Dubai.
“Consequently, this could diminish the price advantage that Dubai offers, potentially impacting gold purchases in Dubai by Indian buyers. However, we are confident Dubai’s established reputation as a global jewellery hub and its diverse offerings will still attract buyers despite this change,” he said.
Alukkas added that the reduced duty might influence some purchasing decisions, however, it would be premature to say that there will be a decline in demand. “Time will tell whether these reductions will directly contribute to demand fluctuations.”
Alukkas doesn’t expect Indian tourists to buy less jewellery in Dubai after the price gap narrowed because he suggests that price is not the sole factor driving purchase decisions when it comes to gold jewellery.
“Dubai remains the leading destination for gold shoppers due to its competitive prices, high quality and unique designs. Additionally, Indian tourists can enjoy tax-free shopping and access to exclusive collections which may only be available here.”
Combatting smuggling
According to the Global Trade Research Initiative, India’s gold and silver imports from UAE jumped 210 per cent to $10.7 billion (Dh39.2 billion) in 2023-24.
Quoting markets report, the World Gold Council said there is a significant rise in imports of platinum alloy which contain over 80 per cent of gold content from the UAE. Importers are reportedly taking advantage of the import duty differential under the UAE-India Comprehensive Economic Partnership Agreement (CEPA), where the import duty on platinum alloy – 5 per cent – is lower than that of gold from the UAE – 14 per cent. As per media reports, platinum alloy to the tune of 13 tonnes was cleared by customs in the four weeks since mid-June, surpassing the total imports of 9.9 tonnes of the same in 2023.
Shamlal Ahamed said the reduction in import duty is a significant milestone in curbing illegal gold imports to India. “Customers will draw benefits from the attractive prices on legally sourced gold, thereby, resulting in greater market growth for organised jewellery retailers in India. This should also provide accelerated growth and create a more transparent and efficient jewellery sector. Ultimately, this move will provide a substantial boost to the Indian economy,” said Ahamed.