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India’s decision to sharply raise import duties on gold and silver to 15 per cent from 6 per cent is reshaping the economics of bullion buying across the Gulf and setting up what could become one of the busiest summer seasons for UAE jewellery retailers in years.
The move comes at a sensitive time for the regional gold trade — just weeks before the annual holiday and wedding travel rush, when millions of Indian expatriates traditionally buy gold in the UAE before flying home for summer vacations.
While the higher duty is intended to curb India’s swelling import bill and conserve foreign exchange reserves, it has also widened the price gap between India and Gulf markets, creating fresh incentives for NRIs and tourists to purchase jewellery in the UAE.
Why did India raise import duties?
India increased customs duties on gold and silver as part of broader efforts to reduce non-essential imports amid elevated oil prices, geopolitical uncertainty and pressure on the current account deficit.
The country’s gold import bill surged 24.1 per cent to nearly $72 billion in FY26 despite lower import volumes because international bullion prices climbed more than 40 per cent over the past year.
Gold remains India’s second-largest import item after crude oil, making it a major source of pressure on foreign exchange reserves whenever global prices spike sharply.
The tariff increase also follows Prime Minister Narendra Modi’s unusual public appeal urging Indians to defer discretionary gold purchases for at least a year and redirect savings into productive financial assets and nation-building investments.
Together, the record price rally, the import duty hike and Modi’s appeal have created what traders describe as a “triple shock” for India’s gold market.
Why is the Gulf market so exposed?
The UAE — particularly Dubai — is one of the world’s largest gold trading, refining and jewellery retail hubs.
Dubai’s bullion ecosystem is deeply tied to Indian demand. Indian expatriates, tourists and traders account for a substantial portion of jewellery purchases across the UAE, especially during festival and wedding seasons.
Summer is traditionally one of the busiest periods, as many NRIs prefer buying jewellery in Dubai before travelling to India, where prices are usually higher due to import duties and taxes.
The latest tariff increase could make that price difference even more pronounced.
How much cheaper could gold be in the Gulf?
Industry executives estimate that gold and jewellery in the UAE and wider GCC could now be around 10-12 per cent cheaper than in India once the revised duty structure is fully reflected in Indian retail prices.
The UAE’s lower taxation system further strengthens that advantage.
Investment-grade gold bars in the UAE are exempt from VAT. Tourists can reclaim VAT on eligible purchases, and making charges are generally lower than in India and many other global markets.
According to industry executives, the current pricing gap represents one of the strongest buying incentives Gulf markets have seen in years.
“The price advantage of nearly 12 per cent compared to India is transformational rather than marginal,” said Shamlal Ahamed, MD-International Operations, Malabar Gold & Diamonds.
“With NRI wedding season approaching in July and August, residents can enjoy substantial savings by purchasing gold from the UAE,” he said.
How do the new duty-free rules help NRIs?
India’s revised Union Budget rules, introduced earlier this year, increased duty-free gold allowances for travellers.
Women can now carry up to 40 grams of gold jewellery duty-free into India, while men can carry up to 20 grams.
That means a family of four could legally carry up to 140 grams of jewellery without paying customs duty, creating significant savings opportunities for expatriate families travelling home this summer.
Industry executives believe this could trigger a short-term buying rush in Gulf jewellery markets.
“This summer could be a record season for Gulf jewellery retail,” said Ramesh Vora, chairman of Bafleh Jewellers.
“India’s decision to raise gold import duty has widened the price gap between Indian domestic prices and international benchmarks, making the Gulf an even more attractive buying destination,” he said.
Will demand still weaken despite the price advantage?
Possibly. Record gold prices have already reduced affordability for many middle-income consumers.
Jewellers across the Gulf say buyers are increasingly shifting toward lighter ornaments, lower-weight jewellery, and exchange purchases rather than large, discretionary purchases.
Modi’s call to postpone gold purchases has also created psychological pressure among consumers already worried about rising living costs.
As a result, the Gulf market may witness two parallel trends this summer — a surge in opportunistic buying by NRIs seeking price advantages, alongside weaker overall consumption because of high bullion prices.
Could unofficial gold flows rise again?
Analysts warn that sharp increases in Indian import duties have historically encouraged grey-market activity and unofficial gold flows through regional transit hubs.
If domestic Indian prices rise significantly above international levels, smuggling incentives could increase again, particularly if global bullion prices remain elevated.
That risk may become more pronounced if Indian retail premiums continue to widen in the coming months.
What does this mean for Gulf jewellers?
For Gulf retailers, especially in the UAE, the coming months could present both opportunity and risk.
In the short term, the widening India-Gulf price gap is likely to increase footfall, especially among Indian expatriates preparing for summer travel and weddings.
But over the longer term, persistently high bullion prices and weaker affordability could slow overall jewellery consumption across the region.
Many jewellers are already adapting by focusing more on investment-grade bullion, lighter jewellery collections, digital gold products and affluent international tourists to reduce dependence on mass-market Indian demand.
Still, with one of the biggest price arbitrage opportunities in years now emerging between Indian and Gulf markets, Dubai’s gold trade could be poised for a strong summer boost despite mounting uncertainty in the global bullion market, bullion experts said.
- Dubai
- India
