The country’s gold imports in November reached a record high of USD 14.86 billion, registering a four-fold increase, mainly due to the needs of festivals and weddings, according to data from the commerce ministry.
Gold imports stood at USD 3.44 billion in November 2023.
Combined, imports during April-November this fiscal year increased by 49 percent to USD 49 billion compared to USD 32.93 billion in the same period of the previous fiscal year.
According to the department, gold, which accounts for 25 percent of the annual return, is one of the best-performing assets in 2024 (until November) and the high foreign purchases reflect the strong confidence of investors in the precious metal as a safe asset.
Other reasons include asset diversification towards gold due to global uncertainty, increased banking demand, tax cuts.
Yellow metal prices have increased by 23 percent so far this year to Rs 78,350 per 10 gm in the national capital.
In the Budget, the government reduced the duty from 15 percent to 6 percent.
India’s gold imports, which contribute to the country’s current account deficit (CAD), have increased by 30 percent to USD 45.54 billion in 2023-24.
Switzerland is the largest gold importer, with a share of around 40 percent, followed by the UAE (over 16 percent) and South Africa (around 10 percent).
Precious metal accounts for more than 5 percent of the country’s total imports.
A jump in gold exports pushed the country’s trade deficit (the difference between imports and exports) to a record USD 37.84 billion in November.
India is the world’s second largest importer of gold after China. Imports mainly cater to the demand of the jewelery industry. Gems and jewelery exports last month fell by 25.32 percent year-on-year to USD 17.43 billion.
The country’s CAD grew slightly to USD 9.7 billion, or 1.1 percent of GDP, in April-June 2024 compared to USD 8.9 billion, or 1%, in the previous period.
A current account deficit occurs when the amount of imported goods and services and other payments exceeds the amount of exports of goods and services and other receipts by a country at a given time.
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 importance as experts have expressed serious concerns about the rising rate of imports of precious metals from the UAE under the trade agreement.
Calling for an urgent review of the agreement, the Global Trade Research Initiative (GTRI) said the India-UAE CEPA allows for unlimited export of gold, silver, platinum, and diamonds from the UAE to India duty-free in the coming years.
This will lead to a significant loss of annual revenue, move import business from banks to a few independent traders, and replace major suppliers with Dubai-based firms, the GTRI report said.
It stressed that currently, gold can be imported from Dubai with a duty of 5 percent, but this will drop to zero in three years if the alloy contains 2 percent of platinum.
GTRI also said that many imported goods do not meet the requirements of the Rules of Origin and, therefore, are not eligible for concessions.