India should exclude precious metals from its free trade agreements (FTA) so as to curb speculative imports, safeguard foreign exchange reserves and protect India’s trade balance and economic resilience, think tank Global Trade Research Initiative (GTRI) said Tuesday.
Gold imports reached a staggering $14.9 billion in November 2024, accounting for 21.2% of India’s total merchandise imports of $70 billion and for the first time, gold surpassed crude petroleum as the country’s largest single import item.
Most gold enters India as bars and rods with 99.99% purity, but traders are also using other tariff-free or concessional categories to bypass import duties such as platinum alloys from Dubai, gold compounds and noble metal solutions from Japan, and gold and silver jewelry from Indonesia. These routes push actual gold imports to much higher levels than official figures suggest.
A speculation around a potential hike in the gold import tariff to 10% from 6% in the upcoming Budget is also driving imports, it said.
The India-UAE Comprehensive Economic Partnership Agreement (CEPA), effective since May 1, 2022, has further contributed to the surge as it allows unlimited duty-free imports of gold, silver, platinum, and diamonds into India over the coming years.
“India’s experience with CEPA highlights the risks of offering tariff concessions on precious metals like gold, silver, and platinum in FTAs. These high-value, low-volume imports disproportionately impact India’s trade deficit and forex reserves, undermining macroeconomic stability,” said Ajay Srivastava, GTRI founder.
Even if tariffs remain unchanged, rising global gold prices ensure importers would not face losses, according to the report.