India has encountered a staggering 210% surge in its gold and silver imports from the United Arab Emirates (UAE) during the fiscal year 2023-24, totaling $10.7 billion, prompting calls for potential revisions to the concessional customs duty rates established under their Comprehensive Economic Partnership Agreement (CEPA). This dramatic rise is primarily attributed to import duty concessions granted by India to the UAE, wherein silver enjoys a 7% tariff concession on unlimited quantities, while 160 metric tonnes of gold benefit from a 1% tariff. Signed in February 2022 and enacted in May 2022, CEPA facilitated these imports by allowing private firms to directly import through the India International Bullion Exchange (IIBX) in Gift City, a privilege previously limited to authorized agencies.
Despite an overall 9.8% decline in India’s total imports from the UAE, dropping to $48 billion in FY24 from $53.2 billion in FY23, gold and silver imports skyrocketed from $3.5 billion to $10.7 billion. Ajay Srivastava, Founder of the Global Trade Research Initiative (GTRI), has highlighted the unsustainable nature of these imports, emphasizing the UAE’s lack of gold and silver mining capabilities or sufficient value addition, leading to a substantial arbitrage. Mr. Srivastava advocates for lowering India’s high import tariffs of 15% on gold, silver, and jewellery to 5% to mitigate large-scale smuggling and misuse, which he estimates has led to substantial revenue losses.
Moreover, concerns over misuse and revenue loss have prompted recommendations to implement yearly import quotas for silver, similar to those for gold, and to rigorously verify claimed value additions by Dubai-based refiners to ensure compliance with CEPA rules of origin. The report underscores the need for stringent regulations around the IIBX at Gift City, urging controls to manage the volume and nature of precious metal imports and rejecting country-based exemptions. It further advises India to reassess its duty-free tariff preference (DFTP) scheme and FTAs involving gold and silver, advocating for a comprehensive review to safeguard against increased current account deficits.
The surge in silver imports from the UAE, which rose to $1.74 billion in FY24 from $29.2 million in FY23, driven by an 8% duty differential under CEPA compared to 15% from other countries, highlights substantial revenue losses amounting to ₹1,010 crore. This trend is compounded by gold imports rising 147.6%, reaching $7.6 billion in FY24 from $3 billion in FY23, and jewellery imports escalating 290% from $347 million to $1.35 billion in the same period. These figures underscore the urgent need for India to reassess and potentially revise its tariff structures to balance trade policies, protect domestic revenues, and ensure fair competition in precious metals and jewellery imports.
