Dubai: India is starting to take drastic measures to halt the softening of the rupee against the dollar, and today has confirmed a 5 per cent hike in gold import duty to 12.5 per cent.
India has taken this step to try and reduce imports of gold into the country, and thus save up on its dollar reserves. This in turn will help with bringing some stability to the rupee, which dropped under 21 to the dirham for the first time in May.
Today (July 1), the rupee is hovering at 21.52/21.54 to the dirham, creating a significant opportunity for Indian expats on remittances. Leading currency exchanges houses in the UAE have already been seeing higher volumes on the rupee in the last two days – “The daily average has been around Rs350 million and that should be rising to Rs450 million to Rs500 million or more in the next four-five days,” said Neelesh Gopalan, Senior Treasury Analyst at LuLu Exchange. “The full salary related remittances are yet to start in strength.”
Will gold duty hike help?
The Indian government’s move on the duty is aimed at reducing consumption of gold and jewellery, with less imports of the metal being decisive in this respect. What it also does is widen the gap between buying gold in the UAE and in India, which too creates opportunities for Indian expats to buy here and sell there.
“The price gap was already wide, and with the 5 per cent increase, there is every incentive for Indian shoppers to pick up gold in the UAE,” said Shamlal Ahamed, International Director at Malabar Gold & Diamonds. “Whether the duty hike will reduce consumption, however, is still a big unknown.
"Just today, the price gap between buying gold in the UAE and India is at 12-15 per cent."