India calls for review of UAE trade agreement amid surge in gold and silver imports 

Global Trade Research Initiative (GTRI) suggests an urgent review, warning that the agreement could lead to significant annual revenue losses 

 
New Delhi: India’s gold imports soared to a record high of $10.06 billion in August 2024, more than doubling from $4.93 billion during the same month last year. This sharp increase is attributed to a significant reduction in customs duties and heightened demand ahead of the festive season, according to data from the Commerce Ministry. 

 
In light of the substantial increase in gold imports, India is now seeking a review of certain provisions of its free trade agreement with the UAE, which came into effect on May 1, 2022. Experts have raised concerns regarding the agreement’s potential impact on the import of precious metals into India, as it allows for unlimited imports of gold, silver, platinum, and diamonds from the UAE with zero tariffs. 

Commerce secretary Sunil Barthwal noted that the government’s decision to cut the gold import duty from 15 percent to 6 percent in the recent budget aims to curb smuggling and other illicit activities. “This is also the time when jewellers start stocking up for their inventories to be sold during the festival season,” Barthwal explained. 

Despite the surge in August, gold imports during the first four months of the fiscal year (April-July 2024-25) fell by 4.23 percent to $12.64 billion. For the previous fiscal year, India’s gold imports had increased by 30 percent, reaching a total of $45.54 billion. 

Switzerland remains the largest source of gold imports for India, accounting for about 40 percent of total imports, followed by the UAE with over 16 percent and South Africa at around 10 percent. The precious metal represents over 5 percent of India’s total imports, and the spike in gold imports contributed to a trade deficit of $29.65 billion in August. 

As the world’s second-largest gold consumer after China, India’s imports primarily cater to the demands of the jewellery industry. In the March quarter, India recorded a current account surplus of $5.7 billion, equivalent to 0.6 percent of GDP, while the overall current account deficit for FY24 narrowed to $23.2 billion or 0.7 percent of GDP, down from $67 billion or 2 percent of GDP in FY23. 

The think tank Global Trade Research Initiative (GTRI) has called for an urgent review, warning that the agreement could lead to significant annual revenue losses, shift the import business from banks to a handful of private traders, and replace leading suppliers with Dubai-based firms. 
 
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