India’s gold imports more than doubled in August, reaching a record high of $10.06 billion, driven by a sharp reduction in customs duty and festive season demand, according to data from the Commerce Ministry. This marks a significant rise from $4.93 billion in August 2023. Commerce Secretary Sunil Barthwal attributed the surge to the drastic cut in gold tariffs, aimed at curbing smuggling, and the increased stocking by jewellers ahead of the festival season.
The government reduced customs duty on gold from 15% to 6% in the recent budget. While gold imports impact India’s current account deficit (CAD), they fell by 4.23% to $12.64 billion during the April-July period of FY25. In 2023-24, gold imports increased by 30% to $45.54 billion.
Switzerland remains the largest source of India’s gold imports, accounting for 40%, followed by the UAE (16%) and South Africa (10%). The rise in gold imports contributed to a trade deficit of $29.65 billion in August.
India, the second-largest gold consumer after China, is reviewing certain provisions of the free trade agreement with the UAE, which took effect on May 1, 2022. The review is significant due to concerns over a surge in precious metal imports from the UAE under the trade agreement. A report by the Global Trade Research Initiative (GTRI) warned that the agreement could lead to revenue losses and shift the import business from banks to private traders. The report also noted that gold imports from Dubai, currently subject to 5% duty, could drop to zero in three years if they contain 2% platinum. GTRI raised concerns that many imports do not meet the Rules of Origin conditions required for tariff concessions.
