India to Import 140 Metric Tons of Gold from the UAE Under CEPA
In a strategic move aimed at encouraging business in the Indian gems and jewelry sector, India has prioritized the import of 140 metric tons of gold from the UAE under a reduced rate for 2023-24.
The two countries have negotiated a gold tariff quota provision under their Comprehensive Economic Partnership Agreement (CEPA), which went into effect a year ago on May 1.
Fresh window for UAE gold imports for 2023-24
A dedicated channel will facilitate India’s gold imports from the UAE at a one percent concessional duty rate. This has been allowed under the CEPA arrangement signed between India and the UAE, which came into effect May 1, 2022.
The India-UAE CEPA aims to accelerate bilateral trade and investment across various sectors, including goods, services, and investment. The two markets have pledged to reduce or eliminate tariffs on a range of goods, including on gold. The goal is to supercharge two-way annual trade to US$100 billion in five years. About 11,000 items can now be exported to the UAE from India duty-free.
The Director General of Foreign Trade (DGFT) Santosh Sarangi said, “Considering the strong trade partnership between India and UAE as well as to uphold the spirit of the Trade Agreement [CEPA], the matter was considered by the government and the DOR (Department of Revenue) Notification dated 31.03.2023 was issued removing the Jewelery manufacturer criteria.”
The gold tariff rate quota (TRQ) will be allocated to applicants as per India’s revised simpler eligibility criteria under the 2023 Foreign Trade Policy, which promises to ease the compliance burden for Indian importers.
GIFT City to be India’s gold import base, distribution center
Earlier, in October 2022, the GIFT City was nominated as the agency to import 200 metric tons from the UAE under the CEPA arrangement.
India’s trade and commerce minister Piyush Goyal explained, “This solves a big problem of middlemen faced by the gem and [jewelry] sector. Due to these middlemen, gold purchases used to be expensive.”
Thus, the gold imported at GIFT City will subsequently be distributed to other parts of India.
India-UAE CEPA provisions for gold sector
Under the CEPA arrangement, the UAE has provided India with zero-duty market access for its gold jewelry exports, in exchange for tariff rate quota for gold.
India has removed the jewelry manufacturer criteria for gold imports from the UAE. It will allow import of 140 metric tons of gold from the UAE at a one percent concessional rate as negotiated under the CEPA terms.
Thus, the UAE will enjoy a gold TRQ of 200 metric tons where the tariff / import duty will be one percent less than whatever the tariff rate is charged for the rest of the world – in perpetuity. It will be implemented over a five-year period.
In FY 2022-23, India increased the gold TRQ to 110 metric tons, followed by 140 metric tons in FY ’24.
The CEPA is part of India’s proactive efforts to promote trade with key markets, including the Gulf Cooperation Council countries. The UAE was India’s third largest trade partner in 2022-23 with two-way trade reportedly recorded at US$76.16 billion. Saudi Arabia came fourth at US$52.72 billion.
India’s exports to the UAE reached US$31.3 billion in 2022-23, at 11.8 percent year-on-year growth and an increase of about US$3 billion (see government press release marking one year of the India-UAE CEPA).
India’s gems and jewelry market
India is the world’s second largest jewelry market after China. In 2021, India bought 611 metric tons of gold jewelry. The gold market in India is tied to long-standing sociocultural and religious traditions besides its economic value.
Sector contribution to economy
Gems and jewelry contributes around seven percent to India’s gross domestic product (GDP) and contributes to about 10-12 percent of total merchandise exports. India’s gems and jewelry exports in FY 2021-22 grew 44 percent from the previous fiscal.
The sector employs more than five million skilled and unskilled labor.
The USA is India’s largest importer of jewelry. Other key export markets for India’s gems and jewelry sector are Hong Kong, UAE, Belgium, Israel, Thailand, Singapore, the UK, Netherlands, and Japan.
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