Dubai is starting to lose its appeal as a gold haven for non-resident Indians (NRIs) in transit. A recent cut in customs duty and lower labour costs have made purchasing gold jewellery in India more cost-effective than making a stop in the Emirate.

Leading jewellers have reported a 10-15 per cent increase in purchases by non-resident Indians (NRIs) over the previous year, particularly between November and December. Total sales during these two months are expected to reach around 80 tonnes.

Dubai has long been a popular destination for gold purchases among NRIs and Indian tourists. However, many of them are now entrusting their orders to local jewellers. This shift is attributed to a decline in gold prices following a reduction in import duty from 15 per cent to 6 per cent in July. Moreover, the cost of manufacturing jewellery in India is significantly lower (often at least half the cost compared to Dubai) due to lower labour costs, which encourages NRIs to buy gold from their home country.

NRIs typically visit India during the winter months, coinciding with the wedding season, and they were known to buy gold jewellery while transiting through the UAE.

Joy Alukkas, the chairman of the well-known jewellery chain, stated that NRI purchases at its Indian stores have increased by 10% during this wedding season (from November 15 to December 15). In contrast, sales at their Dubai outlets have declined, as most NRIs now prefer to buy gold jewellery in India. The Kochi-based chain operates 160 stores, including 35 in Dubai.

Dubai levies a 5% value-added tax (VAT) on gold jewellery, while India recently reduced its customs duty to 6%. The move means Dubai’s VAT does not adequately compensate for its higher labour costs.

In the September quarter, India saw an 18% increase in gold demand year-on-year to 248.3 million tonnes, driven by lower tariffs and lower import prices. Demand rose by 8.6% overall in the first nine months of 2024. Strong sales during Dhanteras and Diwali were estimated at 40 tonnes, and gold has delivered a 23% return over the past year.

”Labour is cheaper in India, leading to lower making charges of 10-20%, compared to 25-35% in Dubai,” said Rajesh Rokde from the All India Gem & Jewellery Domestic Council. Typically, NRIs purchase jewellery worth ₹5 lakh to ₹25 lakh.

Rajiv Popley from Popley & Sons noted that the perception of overseas gold being cheaper is changing. “Labor costs are much lower in India, and mandatory hallmarking has resolved purity concerns”.

Image Source: The Economic Times