The country’s gold imports in November reached a record high of USD 14.86 billion, registering a four-fold increase, mainly on account of festival and wedding demands, according to commerce ministry data.
Gold imports stood at USD 3.44 billion in November 2023.
Cumulatively, imports during April-November this fiscal year rose 49 per cent to USD 49 billion as against USD 32.93 billion in the same period last fiscal year.
According to the ministry, gold, with about 25 per cent average annual return, is one of the best-performing assets in 2024 (till November) and high imports indicate strong investor confidence in the precious metal as a safe asset.
The other reasons include asset diversification towards gold due to global uncertainties, increasing demand from banks, cut in customs duties.
Prices of the yellow metal have increased 23 per cent so far this year to Rs 78,350 per 10 gm in the national capital.
In the Budget, the government slashed the duty from 15 per cent to 6 per cent.
India’s gold imports, which have a bearing on the country’s current account deficit (CAD), surged 30 per cent to USD 45.54 billion in 2023-24.
Switzerland is the largest source of gold imports, with about 40 per cent share, followed by the UAE (over 16 per cent) and South Africa (about 10 per cent).
The precious metal accounts for over 5 per cent of the country’s total imports.
The jump in gold imports pushed the country’s trade deficit (difference between imports and exports) to a record USD 37.84 billion in November.
India is the world’s second-biggest gold consumer after China. The imports mainly take care of the demand by the jewellery industry. Gems and jewellery exports last month declined 25.32 per cent year-on-year to USD 17.43 billion.
The country’s CAD widened marginally to USD 9.7 billion, or 1.1 per cent of the GDP, in April-June 2024 against USD 8.9 billion, or 1 per cent, in the year-ago period.
A current account deficit occurs when the value of goods and services imported and other payments exceed the value of export of goods and services and other receipts by a country in a particular period.
India is seeking a review of certain provisions of the free trade agreement with the UAE, which came into force on May 1, 2022.
The review assumes significance as experts have raised serious concerns over the spurt in imports of precious metals from the UAE under the trade agreement.
Seeking an urgent review of the pact, think tank Global Trade Research Initiative (GTRI) has stated that the India-UAE 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 GTRI report has said.
It highlighted that currently, gold can be imported from Dubai at 5 per cent duty, but this will drop to zero in three years if the alloy contains 2 per cent platinum.
GTRI has also claimed that many imports do not meet Rules of Origin conditions and, hence, do not qualify for concessions.
