New Delhi, Dec 17 Think tank GTRI on Tuesday said India’s gold imports have increased alarmingly, posing a potential threat to its trade balance and economic stability, and the government should take action to address the issue. According to commerce ministry data, the country’s gold imports rose to a record high of $14.86 billion in November, registering a four-fold increase, mainly due to festival and wedding demand.
Gold imports stood at $3.44 billion in November 2023. GTRI said imports are driven by a number of factors, including rising investment demand, tariff cuts and loopholes in trade agreements. The surge has raised significant economic concerns, worsened the trade balance, weakened the rupee and widened the current account deficit, the Global Trade Research Initiative (GTRI) said.
Gold imports in November accounted for 21.2 per cent of India’s total merchandise imports of $70 billion. For the first time, gold overtook crude petroleum as the country’s biggest single import item.
“This sharp rise pushed India’s monthly trade deficit to its highest level, putting pressure on the rupee, which has weakened against the US dollar. A weak rupee further increases import costs, worsening the current account deficit,” said Ajay Srivastava, founder of GTRI.
He said most of the gold in India comes in the form of bars and rods with 99.99 per cent purity, but traders are also using other tariff-free or concessional categories to avoid import duty.
“Rising gold imports threaten India’s trade balance and economic stability, and require urgent action to address this,” he said.
He said the country’s experience with the free trade agreement with the UAE highlights the risks of offering tariff concessions on precious metals such as gold, silver and platinum in FTAs.
Srivastava said, “These high value and low volume imports adversely impact India’s trade deficit and foreign exchange reserves, thereby affecting macroeconomic stability. It is important to keep precious metals out of FTAs to curb speculative imports, safeguard foreign exchange reserves, and protect India’s trade balance and economic resilience.”
