Gold, silver imports from UAE up 210% in 2023-24; FTA duty revision needed: GTRI
Calls for Duty Review Under CEPA Amidst Concerns Over Trade Dynamics
India’s Gold and Silver Imports Surge 210% from UAE in FY 2023-24
India saw a remarkable 210% surge in gold and silver imports from the UAE during the fiscal year 2023-24, reaching a total of $10.7 billion. This substantial increase has prompted discussions on the need to reassess duty rates under the Comprehensive Economic Partnership Agreement (CEPA) between India and the UAE. Signed in February 2022 and implemented in May of the same year, CEPA aims to facilitate bilateral trade through various concessions, including reduced import tariffs.
The agreement allows for a 7% duty on unlimited quantities of silver imports and a 1% tariff on 160 metric tonnes of gold, reflecting efforts to bolster economic ties and streamline trade processes. These provisions have led to an influx of gold and silver imports facilitated by the India International Bullion Exchange (IIBX) in Gift City, previously restricted to authorized agencies.
Despite an overall decline in India’s total imports from the UAE by 9.8%, from $53.2 billion in FY23 to $48 billion in FY24, the significant rise in precious metal imports remains a focal point of concern. Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), has raised alarms over the sustainability of such imports, citing the UAE’s limited domestic production of gold and silver and questioning the value added through these imports.
India maintains a 15% import duty on gold, silver, and jewellery, which has inadvertently created arbitrage opportunities and potential misuse through practices like smuggling. Srivastava proposes revising these tariffs to a lower 5% rate to mitigate revenue losses and ensure fair competition among importers. He argues that current policies disproportionately benefit a select few importers who exploit tariff differentials without passing on cost savings to consumers.
To address these challenges, GTRI recommends implementing annual import quotas for silver similar to those for gold, enhancing verification procedures to monitor value addition by Dubai-based refiners, and strengthening regulatory oversight of operations at the IIBX in Gift City. These measures aim to protect India’s economic interests, prevent abuse of duty concessions, and uphold fair trade practices under the CEPA framework.
Furthermore, the report highlights the peculiarities of gold and silver trade with the UAE, where imported bars are often melted down and exported as raw materials with minimal local value addition. Compliance with CEPA rules of origin, which require a minimum threshold for value addition, is a critical concern given reported discrepancies in actual value-added processes.
As India navigates the complexities of international trade policy, particularly concerning high-value commodities like gold and silver, the need for a comprehensive review of tariff structures and trade agreements becomes increasingly urgent. Balancing economic imperatives with regulatory oversight and revenue considerations will be pivotal in ensuring sustainable and mutually beneficial trade relations with the UAE and other global partners. India’s ability to safeguard its economic interests while promoting transparency and equity in precious metals trade will shape its stance in the evolving global economic landscape.
