Indian gold jewellery exports down 47% in Feb on lower offtake from Gulf

5% import duty levy by the UAE hits jewellery shipment, exporters seek cut on gold import duty

Gold jewellery exports from India routed through West Asia are being adversely affected because of two reasons: First, because of the 10 per cent import duty levied on imported gold used in making jewellery, and, second, by the 5 per cent import duty on jewellery levied by the United Arab Emirates (UAE) effective January 1.

Gold jewellery exports dropped more than 24 per cent in January and 47.52 per cent in February. India has been losing exports rapidly to competitors including China.

Experts say there has been an increase in the number of manufacturing units set up in the UAE because of this phenomenon. These manufacturing bases are dominated largely by Indians who own similar units in India. As a result, people who work on gold are migrating to the UAE, which accounts for nearly 20 per cent of India’s jewellery exports.

“Dubai is no longer a free trade centre. The immediate need of the hour is to reduce the import duty on gold. An import duty on gold beyond 5 per cent is counterproductive. Hence, the government should cut the import duty on gold to below 5 per cent to arrest the fall in gold jewellery exports,” said Praveen Shankar Pandya, chairman, Gems and Jewellery Export Promotion Council (GJEPC), the premier jewellery export promotion body under the ministry of commerce.

The data compiled by the GJEPC show gold jewellery exports at Rs 2,810.60 crore in February, compared to Rs 5,355.47 crore for the corresponding month last year.

In January gold jewellery exports had plunged to Rs 2,707.58 crore as against Rs 3,566.49 crore in the same month last year. 

Most of the gold jewellery exports to the UAE are sent to other destinations in West Asia including Sharjah and Turkey and a host of African and European countries. 

Since January 1, however, this routing business has stopped.

The government had increased the import duty on gold steadily to 10 per cent in 2013 to bring the current account deficit (CAD) under control. Though the CAD is comfortable now, the government persists with it.

“No major Indian manufacturing unit has shifted to the UAE. But we cannot rule out shifting manufacturing there if the current trend continues. Another option with Indian exporters is export to consumers outside the UAE. But the future is not encouraging for gold jewellery exporters,” said Pankaj Parekh, former vice-chairman, GJEPC, and a Kolkata-based jewellery exporter.

The latest move of 1 per cent excise duty levy and others such as supply restriction have adversely affected the gold jewellery industry.