In a strategic move aimed at reshaping gold purchasing patterns, the Union Budget 2024 has introduced a substantial reduction in customs duties on gold imports. This adjustment is anticipated to influence the gold buying behavior of Indian consumers who previously favored shopping in Dubai.
Jewellers operating both in India and the UAE project that the halving of the import duty will lead to a decrease in gold prices within India. This shift is expected to diminish the allure of buying gold in Dubai, which has been a popular destination for Indian gold enthusiasts since a significant duty hike in India in July 2022.
The recent fiscal budget’s decision is also likely to spur growth in gold jewellery production within India. Notably, the ‘Kolkatti’ jewellery from Kolkata, a favorite among Indian expatriates in Dubai and international tourists, could see increased production. This could prompt gold artisans to innovate with new designs in both heavy and lightweight pieces, drawing consumers back to India for their gold purchases.
Joy Alukkas, Chairman of the Joy Alukkas Group, anticipates a major shift in business, with nearly half of their UAE sales potentially moving to India. Indian tourists who previously bought jewellery in Dubai are expected to turn to Indian markets. However, it’s worth noting that Indian expatriates in Dubai and other international customers may continue to purchase from the UAE.
Rajiv Popley, Director at Popley & Sons, argues that the perception of gold being cheaper abroad is outdated. He highlights that labor costs in India are lower, and the introduction of mandatory hallmarking and HUID numbers has resolved concerns about gold purity. Additionally, NRIs in Dubai do not receive VAT refunds, and Indian travelers get only partial VAT reimbursement on gold purchases abroad.
Gold trade analyst Bhargav Baidya suggests that the minimal 1% duty difference between gold in India and Dubai will likely be neutralized by Indian jewellers offering attractive discounts to retain their customer base.
Saurabh Gadgil, Chairman of PNG Jewellers, points out that India’s import duty has now aligned with that of the US, enabling Indian jewellers to offer competitive pricing on a global scale. The reduced customs duty is poised to make gold purchases in India more appealing and convenient for domestic consumers, potentially leading to a notable shift in gold buying trends.
