Retailers in UAE hit by India tax on television imports

India's fight to strengthen the rupee is expected to hit UAE electronics retailers, as the country bans the duty-free import of flat-screen televisions from Monday.

The rupee continued its slide yesterday as it hit a record low of 64.12 against the US dollar.

Airline passengers had been allowed to carry TVs worth up to 35,000 rupees (Dh2,022) into India without paying duty.

This has prompted Indians to take advantage of cheaper prices abroad, with Dubai being one of the most popular destinations.

"Sales for TVs will definitely be impacted as it wasn't only NRIs [non-resident Indians] buying TVs to take back to India but also the tourists," said Ashish Panjabi, the chief operating officer at Jacky's, one of the UAE's biggest consumer electronics retailers. "We estimate that TV unit sales could be affected by as much as 20 per cent overall."

India is Dubai's biggest export market with goods totalling more than Dh35 billion last year, according to data from Dubai Exports. There is a demand for about 8 million flat screen televisions in India a year and up to 3.5 million of these are imported, according to estimates from the Consumer Electronics and Appliances Manufacturers Association. Each year buyers from the country descend on events such as Dubai Shopping Festival and Gitex Shopper to snap up bargains.

From Monday, passengers will have to pay a customs duty of 35 per cent on imported TVs. The move is part of a series of steps being taken by New Delhi to reduce flows of cash out of India.

"We've always been able to see a significant upsurge in sales to Indian tourists whenever there have been school holidays in India, during retail-specific festivals like DSF [Dubai Shopping Festival] and Gitex Shopper or when major events happen on the Indian sporting calendar like the Cricket World Cup or Indian Premier League," said Mr Panjabi.

The government and the Reserve Bank of India last week announced a wave of measures aimed at stemming the slide of the rupee. New Delhi raised the import duty on gold to 10 per cent from 8 per cent and said it would aim to reduce costs of oil imports to narrow the country's gaping current account deficit.

The central bank, meanwhile, imposed new limits on foreign-exchange outflows for Indian companies and individuals last week, including restrictions on buying property abroad.

Stock and bond markets in India have been hit hard as foreign investors have pulled out funds amid signals that the United States Federal Reserve would wind down its quantitative easing programme. The benchmark S&P BSE Sensex yesterday fell below 18,000.

The UAE dirham is pegged to the US dollar, so the slide of the rupee has prompted a surge in remittances to India, as expatriates take advantage of the exchange rate.

"The need of the hour for Indian economy is a meticulous treatment on current account deficit, which can bring the currency back on track," said Promoth Manghat, the vice president of global operations at UAE Exchange, a remittance and currency exchange company.

"This will automatically boost the confidence of FDI [foreign direct investment] and FIIs [foreign institutional investors] on the Indian economy, which would result in the increase inflow of dollars through FDI and FII investments," he said.

"Though the government has announced a series of measures, it could be made possible only if it is backed with strong road maps."

business@thenational.ae