Regarding record imports, Commerce Secretary Sunil Barthwal said that tariff rates on gold have been slashed so that smuggling and other activities can come down.
“And this is the time when jewellers start stocking their stocks to sell during the festival season,” he told reporters.
In the Budget, the government reduced the tax from 15 percent to 6 percent.
India’s gold imports, which influence the country’s growth, current account deficit (CAD), fell 4.23 percent to USD 12.64 billion during April-July 2024-25.
In 2023-24, India’s gold imports are set to increase by 30% to $45.54 billion. Switzerland is the largest source of gold imports, with a share of around 40%, followed by the UAE (over 16%) and South Africa (around 10%). The precious metal accounts for over 5% of the country’s total imports.
The jump in gold imports pushed the country’s trade deficit (difference between imports and exports) to USD 29.65 billion in August.
India is the world’s second largest consumer of gold after China. Imports are mainly intended to meet the demand of the jewelry industry.
In the March quarter, India posted a current account surplus of $5.7 billion or 0.6 per cent of GDP. In fiscal year 2024, the current account deficit narrowed to $23.2 billion or 0.7 per cent of GDP from $67 billion or 2 per cent of GDP in fiscal year 2023.
A current account deficit occurs when the value of imported goods and services and other payments exceeds the value of export of goods and services and other income of a country in a given period.
India is seeking to review certain provisions of the free trade agreement with the United Arab Emirates, which came into effect on May 1, 2022.
The review assumes significance as experts have raised serious concerns over the sudden rise in precious metal imports from the UAE under the trade deal.
Seeking an urgent review of the pact, think tank Global Trade Research Initiative (GTRI) has said that the India-UAE CEPA allows unlimited imports of gold, silver, platinum and diamonds from the UAE into India at zero tariffs for the next few years.
This will lead to a significant annual increase. revenue losses, shifting the import business from banks to a few private traders and replacing major suppliers with Dubai-based companies, the GTRI report said.
He noted that currently, gold can be imported from Dubai with a 5 percent tariff, but this will be reduced to zero in three years if the alloy contains 2 percent platinum.
GTRI has also stated that many imports do not meet the conditions of the rules of origin and therefore do not qualify for concessions.
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