x Abu Dhabi, UAETuesday 25 July 2017

Dubai feels the pain from India’s gold taxes

Exports to India by members of Dubai Chamber of Commerce and Industry fell 18 per cent in the first eight months this year after New Delhi capped inflows of gold and other precious metals.

Customers barter over the price of gold products at the Gold Souq in Deira, Dubai. Jake Badger for The National
Customers barter over the price of gold products at the Gold Souq in Deira, Dubai. Jake Badger for The National

Exports to India by members of Dubai Chamber of Commerce and Industry fell 18 per cent in the first eight months this year after New Delhi capped inflows of gold and other precious metals.

Exports and re-exports to India dropped to Dh3 billion, according to data from the chamber.

It follows the Indian government raising the duty on gold bullion this year to 10 per cent and setting the import duty on gold jewellery at 15 per cent.

“The restrictions are solely responsible for minus shipments into India,” said Gerhard Schubert, the head of commodities at Emirates NBD. “It puts extra strain on traders and there is still not enough clarity on the rules, and the uncertainty is stopping the business.”

India has long been one of the biggest markets for Dubai exports, accounting for Dh83bn of exports and re-exports last year. Gold, precious stones, pearls and metals accounted for almost half of UAE exports during that period to India, the world’s largest gold consumer.

New Delhi raised levies on gold imports most recently in August and the government has voiced a commitment to continuing to curb inflows of non-essential commodities in a bid to close its current account deficit and boost the ailing rupee.

In part, the strategy appears to be working, with India’s trade deficit falling last month to its lowest level in 30 months.

Dubai chamber members’ exports and re-exports to Pakistan also fell in the first eight months of the year, down 36 per cent to reach Dh1.6bn over the same period.

Pakistan’s government banned gold imports for 30 days at the start of August.

Dubai chamber members’ overall exports and re-exports rose by 5 per cent in the first eight months of the year to Dh189.3bn. The growth was supported by robust appetite in GCC countries, which accounted for 58 per cent of total exports and re-exports.

The narrowing of exports to India this year follows a slower pace of growth in UAE exports to India last year. Exports expanded 6 per cent last year, down from a 17 per cent rise the year before.

Officials say the dip is partly a reflection of easing demand in India’s economy as it cooled to 6.2 per cent last year from 6.5 per cent the previous year. The economy grew 4.4 per cent in the three months to June, the weakest quarterly rate since the global financial crisis.

“It is true that the rate of growth has slowed but the magnitude of values is still increasing,” said Ashraf Ali Mahate, the head of export market intelligence at Dubai Exports, an agency of the emirate’s Department of Economic Development. “The reasons for this are that the country has a very large and growing population. As such, you will automatically find that their tastes and expenditure patterns will change with a growing demand for imported products.”

According to HSBC’s latest Trade Forecast report, released last week, India will become an even more important trading partner for the UAE by 2030.

The country would go from taking more than 10 per cent of total exports now to 14 per cent by 2030, HSBC estimated.

tarnold@thenational.ae