Non-Resident Indians (NRIs) have traditionally viewed Gulf gold as a valuable investment, often bringing home small quantities during visits to India. For many, Gulf gold served as a financial resource for wedding expenses and other major commitments. However, the recent reduction in India's gold import duty from 15% to 6%, announced in the last budget, appears to have shifted this trend. The price advantage that once drew expatriates to Gulf markets has reportedly diminished, and its impact is becoming evident.
Reports suggest that the profit margin for bringing gold from Gulf countries has decreased significantly. Earlier, individuals could gain up to ₹5,000 per tola (11.66 grams), the figure has now fallen to less than ₹1,000. Tourists, who once purchased up to 100 grams of gold during trips to Dubai or other Gulf destinations to offset travel costs, appear less inclined to do so. Furthermore, smuggling activities, once a significant factor in the movement of gold, are said to have decreased. Industry insiders indicate that the gold trade in Gulf countries may have declined by 10-20%.
As the profitability of Gulf gold has declined, there appears to be a corresponding increase in reliance on the Indian gold market. Jewelers in Kerala have reportedly observed a 10-15% rise in gold purchases by expatriates during November and December compared to the previous year. Industry sources estimate that gold sales in Kerala during the last two months of the year approached 80 tonnes.
Several factors may have contributed to this shift. The reduction in import duty has likely narrowed the price difference between Indian and Gulf gold. Moreover, the cost of labour and value-added tax (VAT) seem to offer Indian markets an edge. While Dubai imposes a 5% VAT on gold, India’s current import duty of 6% results in only a marginal difference. Additionally, jewellery-making costs in India are reportedly lower, with labour charges ranging from 10-20% of the gold price compared to 25-35% in Dubai.
The gold trade in Kerala appears to be experiencing a resurgence. Adv. S. Abdul Nassar, state treasurer of the All Kerala Gold and Silver Merchants Association (AKGSMA), noted that the reduction in import duty has stimulated gold trade activity in the state. Jewelers have also observed increased purchases during the wedding season and holidays when many NRIs return to India.
Local jewellers have reportedly introduced events like Monsoon Fest and NRI Fest to attract expatriate customers. According to Joy Alukas, a prominent jeweller, purchases made by NRIs in India increased by 10% during the wedding season (15 November to 15 December). Meanwhile, sales in their Dubai stores reportedly declined. The company, headquartered in Kochi, operates 160 stores, including 35 in Dubai.
While the shift in trends suggests a growing preference for Indian gold, the long-term implications remain unclear. Changes in global gold prices, further adjustments to import duties, or fluctuations in labour and VAT costs could influence future buying patterns. For now, the Gulf gold trade seems to be facing headwinds, while Indian markets adapt to the evolving landscape.
