India's gold imports surge to record $10 billion in August
What's the story
India's gold imports have reached a new high of $10.06 billion in August, more than doubling the previous year's figure of $4.93 billion, as per the Commerce Ministry data. This significant increase is primarily attributed to a substantial reduction in customs duty, and the ongoing festive demand. Commerce Secretary Sunil Barthwal explained that tariff rates on gold have been significantly lowered, to curb smuggling and other illegal activities.
Economic implications
Gold imports impact India's current account deficit
The surge in gold imports has widened India's trade deficit (the difference between imports and exports) to $29.65 billion in August. Gold imports, which significantly influence the nation's current account deficit (CAD), fell by 4.23% to $12.64 billion during April-July 2024-25. In the fiscal year 2023-24, there was a 30% increase in gold imports amounting to $45.54 billion, highlighting the volatility of this sector on India's economy.
Import sources
Switzerland leads as India's primary source of gold
Switzerland is the leading source of gold imports for India, contributing approximately 40% of the total. The UAE and South Africa follow with over 16% and about 10% respectively. Gold constitutes more than 5% of India's total imports, underscoring its significance in the country's import portfolio. This information provides insight into the global supply chain dynamics that influence India's gold market.
Trade agreement
Concerns over free trade agreement with UAE
India is reviewing certain aspects of its free trade agreement with UAE, which was implemented on May 1, 2022. This review is crucial due to concerns raised by experts, about the surge in imports of precious metals from the UAE under this agreement. The Global Trade Research Initiative (GTRI) has called for an immediate review of this pact, stating that it permits unlimited imports of gold, silver, platinum and diamonds from UAE into India with zero tariffs in future years.