 "'Centre must revise gold, silver concessional duty under India-UAE CEPA'")
Delhi-based think tank Global Trade Research Initiative (GTRI) in a report on Monday said the government should ‘reassess and potentially revise’ the concessional duty rates under India-United Arab Emirates (UAE) trade deal to mitigate the arbitrage driving the sharp rise in gold and silver imports.
Inbound shipments of gold and silver from the UAE skyrocketed by 210 per cent to $10.7 billion during FY24, even as India’s imports from the West Asian nation contracted 9.8 per cent. India-UAE trade deal kicked in from May, 2022.
Under the comprehensive economic partnership agreement (CEPA), India allows 7 per cent customs duty concessions on import of unlimited quantities of silver and 1 per cent concession on 160 metric tonnes of gold.
The report said since increased imports contribute to a higher current account deficit, and gold and silver act more like financial instruments than regular trade items, India should avoid including them in any free trade agreement (FTA). “If necessary, the decision should be made by the Reserve Bank of India, and not by the Department of Commerce,” the report said.
“There is also a need to establish a robust monitoring mechanism to track import volumes and values, ensuring quick policy responses to unusual spikes. High import duties in India on gold, silver and jewellery (15 per cent) are at the root or the problem. Consider lowering tariffs to 5 per cent. This will cut large-scale smuggling and other misuse,” it said.
Since July last year, the government has restricted the import of studded gold jewellery from all countries, with the UAE being an exception, under the trade deal. According to GTRI founder and former trade ministry official Ajay Srivastava, this policy framework has led to a significant increase in imports from the UAE, exacerbating India's trade deficit.
“The current import of gold and silver from the UAE is unsustainable as they don’t mine gold or silver or add sufficient value on imports. The trade will shift to any country which gets bigger tariff concessions from India. Low tariff imports of gold and silver only benefit the few importers who keep all profits arising through tariff arbitrage and never pass it to consumers,” it said.