The Union Budget 2024’s recent decision to halve the customs duty on gold imports is poised to transform gold purchasing habits among Indian consumers, particularly those who frequent Dubai for their gold shopping.
Indian jewellers with operations in both India and the UAE anticipate that the reduced duty differential will lead to lower gold prices in India, diminishing the appeal of buying gold abroad. This adjustment comes in response to a sharp increase in India’s gold import duty in July 2022, which had driven many gold enthusiasts to Dubai for purchases.
The new fiscal policy is also expected to bolster gold jewellery production in India. Specifically, it may benefit popular ‘Kolkatti’ jewellery from Kolkata, which is favored by Indian expatriates in Dubai and tourists. This policy shift is likely to inspire gold artisans to innovate, producing both heavyweight and lightweight designs, thus drawing more consumers to purchase gold within India.
Joy Alukkas, chairman of the Joy Alukkas Group, estimates that the duty reduction could lead to a significant shift, with nearly 50% of their UAE business transitioning to India. However, he notes that Indian expatriates and other customers may continue their gold purchases in the UAE.
Rajiv Popley, director at Popley & Sons, argues that the belief that gold is cheaper abroad is a misconception. He highlights that labor costs are lower in India, and with the enforcement of mandatory hallmarking and HUID numbers, concerns over gold purity have been addressed.
Additionally, NRIs in Dubai do not benefit from VAT refunds, and Indian travelers receive only a partial VAT rebate on their gold purchases abroad. Gold trade analyst Bhargav Baidya suggests that the 1% duty differential between India and Dubai will be balanced by Indian jewellers offering competitive discounts to attract customers.
Saurabh Gadgil, chairman of PNG Jewellers, points out that India’s import duty is now comparable to that of the US, enabling Indian jewellers to offer competitive prices globally. This duty reduction is anticipated to make gold purchases in India more appealing and convenient, potentially leading to a notable shift in consumer preferences.
