India’s negotiations for a free trade agreement (FTA) with Peru face a significant hurdle: duty concessions on gold, which account for a substantial portion of imports from the South American nation.
According to a report by the Global Trade Research Initiative (GTRI), gold imports from Peru constituted 80 per cent of India’s imports from the country in the fiscal year 2023.
Gold, being a high-value product with low volume, currently attracts a 10 per cent basic customs duty in India.
Even minor tariff concessions under the proposed FTA could result in a considerable surge in imports, similar to what was witnessed after tariff reductions in the India-UAE free trade agreement.
With talks set to resume this week in Lima, Peru, the issue of tariff concessions on gold remains a central concern for Indian negotiators.
Ajay Srivastava, founder of GTRI, emphasised the potential for a significant increase in gold imports from Peru if concessions are made.
Notably, Peru ranks as India’s fifth-largest supplier of gold.
The report highlights that India’s global imports of unwrought gold in 2023 amounted to USD 43 billion, with Switzerland being a major contributor.
Given Peru’s significant gold mines, its gold could easily meet any Rules of Origin criteria.
Srivastava pointed out the intricacies of FTA negotiations, highlighting that excluding gold from the agreement could violate WTO regulations.
Peru’s existing trade agreements with major economies and its low tariff barriers indicate that tariff elimination might not substantially benefit Indian products.
The bilateral trade between India and Peru stood at USD 3.12 billion during 2022-23, with India exporting goods worth USD 865.91 million and importing goods valued at USD 2.25 billion.
Key exports from India to Peru include motor vehicles, cotton yarn, electrical and electronics, and pharmaceuticals, while major imports from Peru include gold, copper ores, and silver.
Despite the geographical distance and differences in economic size, both countries aim to enhance bilateral trade and investments through the FTA negotiations.
However, resolving the issue of duty concessions on gold remains a critical challenge for India in achieving a successful trade agreement with Peru.