- Monday, July 01, 2024
An Indian research body has stressed on revising concessional customs duty rates under the FTA with the UAE as the country’s gold and silver imports from the Middle Eastern nation skyrocketed 210 per cent to $10.7 billion in 2023-24.
By: Shubham Ghosh
INDIA’S gold and silver imports from its free trade agreement (FTA) partner United Arab Emirates have skyrocketed 210 per cent to $10.7 billion (£8.43 billion) in 2023-24 and there is a need to potentially revise the concessional customs duty rates under the pact to mitigate the arbitrage driving this surge, a report said on Monday (17), a trade research body has said.
New Delhi-based economic think tank Global Trade Research Initiative (GTRI) said this sharp rise in gold and silver imports is primarily driven by import duty concessions granted by India to the UAE under the India-UAE Comprehensive Economic Partnership Agreement (CEPA).
India allows seven per cent tariffs or customs duty concessions on import of unlimited quantities of silver and one per cent concession on 160 metric tonnes of gold.
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The CEPA was signed in February 2022 and implemented in May the same year.
Additionally, India facilitates gold and silver imports by allowing private firms to import from the UAE through the India International Bullion Exchange (IIBX) in GIFT City in the western state of Gujarat.
Previously, only authorised agencies could handle such imports, the report said.
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“While India’s total imports from the UAE fell 9.8 per cent from USD 53.2 billion (£42 billion) in FY23 to USD 48 billion (£38 billion) in FY24, imports of gold and silver skyrocketed 210 per cent, from USD 3.5 billion (£2.76 billion) to USD 10.7 billion (£8.43 billion),” it said.
“Import of all remaining products fell 25 per cent, from USD 49.7 billion (£39.2 billion) in FY23 to USD 37.3 billion (£29.4 billion) in FY24,” it said.
GTRI founder Ajay Srivastava, who worked as a senior foreign trade official with the Indian government, said the current import of gold and silver from the UAE is unsustainable as the UAE does not mine gold or silver or add sufficient value to imports.
“High import duties in India on gold, silver, and jewellery at 15 per cent are at the root of the problem. Consider lowering tariffs to 5 per cent. This will cut large-scale smuggling and other misuse,” Srivastava said.
Trade in gold, silver, and diamonds has been prone to misuse due to their low volume but high value and high import duties in India. Low tariff imports of gold, silver only benefit few importers who keep all profits arising through tariff arbitrage and never pass it to consumers, he added.
Srivastava suggested the government implement certain measures to help India balance its trade policies, protect domestic revenue, and ensure fair competition in the import of precious metals and jewellery.
It suggested reassessing and potentially revising the concessional duty rates under CEPA to mitigate the arbitrage driving the surge in imports of gold and silver.
“At least, implement yearly import quotas (tariff rate quotas) for silver, similar to those for gold, to control the volume of imports and prevent revenue loss,” it said, adding that India should rigorously verify the claimed value addition by Dubai-based refiners in gold and silver imports to ensure compliance with CEPA rules of origin.
It also asked to tighten regulations around the IIBX to control the volume and nature of precious metal imports and the exchange should not allow country-based exemptions. As increased imports contribute to a higher current account deficit and since gold and silver act more like financial instruments than regular trade items, India should avoid including them in any FTA.
(With PTI inputs)
