The US has become India’s largest export market for gold jewellery ahead of the UAE, the World Gold Council (WGC) said in a report.

According to WGC, the US became the largest market for Indian gold jewellery due to additional tariffs on Chinese jewellery to the US, which made the Indian exporters more competitive.

Secondly, the UAE’s implementation of a 5 per cent import duty in 2017 and 5 per cent Value Added Tax (VAT) in 2018 have negatively impacted its competitiveness.

The WGC said that under a Comprehensive Economic Partnership Agreement (CEPA), introduced in May 2022, 90 per cent of Indian goods sent to the UAE will be given duty-free access. As goods sold in the UAE are re-exported, this has substantially increased India’s gold jewellery exports and will continue to do so.

With the Indian government seeking to boost manufacturing and exports, jewellery exports are likely to rise. Also, proposals to allow advance payments to overseas precious metal suppliers and set up mega common facility centres (CFCs) in the Santacruz Electronics Export Processing Zones (SEEPZ) in Mumbai and Surat could stimulate sector growth if implemented, said WGC.

According to the gold mining companies’ lobby body, CFCs would encourage best practice while state-of-the-art machinery would give small manufacturers access to technology and resources. If these efforts are supported by marketing communications around both quality and craftsmanship, the future of India’s gold jewellery market will be assured.

Though India is the second largest market for gold in the world, the sector faced regulatory changes and shifting consumer behaviour, WGC said.

“Looking ahead, gold jewellery will face further challenges. Changing demographics and the possibility that millennials will move away from gold as other luxury items demand their attention cannot be ignored. Against these headwinds, gold jewellery demand will likely profit from strong economic growth and urbanisation, as incomes rise and the middle class increases. As more people are lifted out of poverty, gold jewellery demand will benefit,” WGC said.