India’s imports of gold and silver from the UAE surged dramatically by 210% to reach $10.7 billion in the fiscal year 2023-24, prompting concerns and scrutiny over the implications of the Comprehensive Economic Partnership Agreement (CEPA) between the two nations, according to a report by the Global Trade Research Initiative (GTRI).
The report highlights significant apprehensions regarding the effectiveness and unintended consequences of the free trade agreement (FTA) with the Gulf nation, particularly in terms of duty concessions granted under the CEPA.
The surge in imports starkly contrasts with a 9.8% decline in overall imports from the UAE in the previous fiscal year, indicating a pronounced shift towards precious metals within India’s trade relationship with its FTA partner.
Under the CEPA, India currently applies a concessional tariff structure that includes a 7% duty on unlimited silver imports and a 1% duty on the first 160 tonnes of gold imported from the UAE. This preferential treatment creates a considerable cost advantage for imports from the UAE compared to other global sources.
The GTRI report raises alarms over several implications of this trend, notably the potential loss of government revenue. India typically imposes a 15% duty on precious metals to generate substantial revenue, yet the concessional rates provided by CEPA are leading to a significant shortfall in tax collection. The report estimates a loss of ₹1.01 billion solely from silver imports in FY24, potentially impacting government expenditures on critical infrastructure and social welfare programs.
The findings underscore broader concerns about the balance between promoting trade and protecting fiscal interests, urging policymakers to reevaluate the terms and implications of bilateral trade agreements, particularly in sensitive sectors such as precious metals.
As India navigates these challenges, stakeholders will closely monitor developments and policy responses to ensure sustainable economic growth and fiscal stability amidst evolving global trade dynamics.
