GTRI finds India’s gold, silver trade with UAE unsustainable, expresses concern over FTA between the two nations 

The current import of gold and silver from UAE is unsustainable as UAE does not mine gold or silver, or add sufficient value add on imports, the GTRI report maintained 

MUMBAI: Global Trade Research Initiative (GTRI), a think tank focused on climate change, technology and trade has expressed concerns over spurt in import of precious metals from the UAE under a free trade agreement with India, contending that it is impacting the domestic jewellery industry and leading to potential annual revenue loss. 

Seeking an urgent review of the agreement, the research body said the India-UAE comprehensive economic partnership agreement (CEPA) allows unlimited imports of gold, silver, platinum, and diamonds from the UAE into India with zero tariffs in the coming years. 

This will lead to significant “annual revenue losses, move import business from banks to a few private traders, and replace top suppliers with Dubai-based firms,” the think tank said in its research report released on 17 July, 2024. 

“The current import of gold and silver from UAE is unsustainable as UAE does not mine gold or silver, or add sufficient value add on imports. The trade will shift to any country which gets bigger tariff concessions from India,” the report 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 and silver only benefit the few importers who keep all profits arising through tariff arbitrage and never pass it to consumers,” the report added. 

The report suggested remedial measures stating a need to “Reassess and potentially revise the concessional duty rates under CEPA to mitigate the arbitrage driving the surge in imports of gold and silver.” 

“Increased imports contribute to a higher current account deficit. Since 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 RBI, not by the Department of Commerce,” the report has suggested, also asking for measures to rigorously verify claimed value addition by Dubai-based refiners in gold and silver imports in order to ensure compliance with the CEPA rules of origin and probe linkage between export and import firms. 

The GTRI report has also recommended to “Tighten regulations around the India International Bullion Exchange (IIBX) at Gift City to control volume and nature of precious metal imports and that Exchange should not allow country-based exemptions.” 

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