NEW DELHI: India's gold imports have surged alarmingly, posing a potential threat to the country's trade balance and economic stability, according to the Global Trade Research Initiative (GTRI). The think tank has urged the government to take immediate action to address the issue.
According to data from the Commerce Ministry, the country's gold imports in November reached a record high of USD 14.86 billion. This is a four-fold increase compared to USD 3.44 billion in the previous year, primarily driven by demand during festivals and wedding seasons.
GTRI stated that the surge in gold imports is driven by multiple factors, including growing investment demand, tariff reductions, and loopholes in trade agreements. This sharp increase has raised significant economic concerns, distorting the trade balance, weakening the rupee, and widening the current account deficit.
In November, gold imports accounted for 21.2 percent of India's total merchandise imports, which amounted to USD 70 billion. For the first time, gold surpassed crude petroleum as the country’s largest single import item.
"This sharp increase pushed India’s monthly trade deficit to its highest level, putting pressure on the rupee, which has depreciated against the US dollar," said GTRI founder Ajay Srivastava. "A weaker rupee raises import costs, further worsening the current account deficit."
Srivastava noted that most of the gold entering India consists of bars and rods with 99.99 per cent purity, but traders are also exploiting other tariff-free or concessional categories to bypass import duties. The country's experience with the free trade agreement (FTA) with the UAE has highlighted the risks of offering tariff concessions on precious metals like gold, silver, and platinum.
"These high-value, low-volume imports disproportionately impact India’s trade deficit and forex reserves, undermining macroeconomic stability. Excluding precious metals from FTAs is crucial to curb speculative imports, safeguard foreign exchange reserves, and protect India's trade balance and economic resilience," Srivastava concluded.