Whalesbook
The significant jump in gold imports from the UAE, now representing 28% of India's total, has prompted the Global Trade Research Institute (GTRI) to call for a review of concessions under the India-UAE Free Trade Agreement. GTRI Founder Ajay Srivastava highlighted that the UAE's share in India's gold imports surged from a pre-FTA 7.9% to 28% by 2025, with imports climbing from $2.9 billion to $16.5 billion over the same period. This surge coincides with Prime Minister Narendra Modi's recent appeal for national austerity, adding urgency to the GTRI's concerns.
Tariff Rate Quota and Duty Benefits
Srivastava pointed out that India has granted preferential access for gold from the UAE through a Tariff Rate Quota (TRQ), initially set at 120 tonnes annually, set to increase to 200 tonnes by 2027. This TRQ allows gold to enter at tariffs 1% lower than standard duties. The situation was further amplified by the reduction in India's general gold import duty from 15% to 6% in the 2024 Budget. Consequently, gold imported from the UAE via the TRQ now effectively faces a duty as low as 5%.
Suspected Rerouting and Policy Recommendations
The GTRI raised a critical concern: the UAE itself does not mine or process gold. This suggests that gold originating from third countries is likely being routed through the UAE to capitalize on the preferential tariffs in India. This practice could undermine the intent of the FTA and negatively impact India's trade balance. In response, the GTRI recommended implementing stricter rules of origin and reassessing the precious metal concessions within the FTA framework. The institute also noted that private firms and jewelers are now permitted direct bullion imports via GIFT City, adding another layer to the trade dynamics.