India’s Gold and Silver Imports from UAE Surge 210%
The report highlights the significant increase in gold and silver imports from India’s free trade agreement partner, the UAE, which surged by 210 per cent to USD 10.7 billion in 2023-24. This surge is primarily due to the import duty concessions granted by India to the UAE under the India-UAE Comprehensive Economic Partnership Agreement (CEPA), signed in February 2022 and implemented in May 2022.
Sustainability Concerns and Import Duty Rates
The sharp rise in gold and silver imports has raised concerns about the sustainability of the current situation, as the UAE does not mine gold or silver or add sufficient value to imports. GTRI Founder Ajay Srivastava emphasized the need to address the high import duties in India, which currently stand at 15 per cent for gold, silver, and jewellery. Lowering these tariffs to 5 per cent could help reduce smuggling and misuse of the system, benefiting both importers and consumers.
Recommendations for Policy Revisions
The report suggests reevaluating and potentially revising the concessional duty rates under CEPA to mitigate the arbitrage driving the surge in gold and silver imports. Implementing yearly import quotas for silver, similar to those for gold, could help control the volume of imports and prevent revenue loss. Tightening regulations around the India International Bullion Exchange (IIBX) at Gift City and ensuring compliance with CEPA rules of origin are also recommended measures.
Avoiding Inclusion of Precious Metals in FTAs
Given that gold and silver act more like financial instruments than regular trade items, the report advises India to avoid including them in any future free trade agreements. The continued granting of tariff concessions for these items in various FTAs and schemes like the Duty Free Tariff Preference (DFTP) warrants a comprehensive review to safeguard domestic revenue and ensure fair competition in the import of precious metals and jewellery.
Insights on Silver and Gold Imports
The report highlights the significant increase in silver imports from the UAE, which saw a multifold increase to USD 1.74 billion in 2023-24. The large tariff arbitrage of 7 per cent resulted in a substantial revenue loss for India, indicating the need for careful monitoring and control of such imports. Similarly, the surge in gold imports due to tariff concessions under CEPA should be closely monitored to prevent revenue losses and ensure fair trade practices.
In conclusion, the surge in gold and silver imports from the UAE underscores the need for strategic policy revisions to balance trade interests, protect domestic revenue, and ensure fair competition in the import of precious metals and jewellery. By reassessing tariff rates, implementing import quotas, and tightening regulations, India can better manage its trade relationships and mitigate the risks associated with unsustainable import surges.
