India imports 800-1,000 tonnes of gold each year, making it the second-largest gold buyer after China. In 2024, gold imports saw major fluctuations, reaching peak in November and coming down by over 50 per cent in December.

Despite government attempts to curb imports through tariffs and policy changes, festive demand, investor interest, and price swings kept gold purchases high. Trade data errors added to the confusion. The strong appeal of gold continues to resist control efforts. Here’s how it all played out.

FTA with UAE

The India-UAE CEPA, launched in May 2022, reshaped India’s gold imports by offering lower tariffs on gold, silver, platinum, and diamonds from the UAE. The UAE doesn’t mine gold; it processes gold from other countries and exports it to India.

Under CEPA, India allowed 160 tonnes of gold from Dubai annually at 14 per cent duty, compared to the normal 15 per cent tariff. However, gold classified as platinum alloy (with 98 per cent gold) could be imported in unlimited quantities from Dubai at just 5 per cent duty, far lower than the 15 per cent rate for other countries. Silver imports from Dubai were taxed at 8 per cent, compared to the regular 15 per cent rate. These lower tariffs drove a surge in imports.

In FY2024, India imported 119.35 tonnes of gold bars valued at $7.62 billion from the UAE. Silver imports from the UAE increased by an astounding 5,853 per cent, from $29.2 million in FY2023 to $1.74 billion in FY2024. Gold jewellery imports from the UAE rose by 290 per cent, reaching $1.35 billion in FY2024. Traders exploited tariff classification rules to import gold in the form of platinum alloys, which saw a massive 16,500 per cent increase in imports during January-October 2024, year on year.

Tariff cut in Budget 2024

To counter the surge in concessional duty imports under the CEPA, the government reduced import duties on gold and silver from 15 per cent to 6 per cent in the Budget in July 2024.

The objective was to lower the Most Favoured Nation (MFN) tariff rates below the CEPA tariffs, making imports from the UAE less attractive. MFN is a term used by WTO to denote normal duty charged on imports.

Renegotiating CEPA

The Budget’s tariff reduction offers short-term relief, as CEPA tariffs will drop further to zero in a few years.

Recognising this issue, the Indian government decided to review the agreement on August 14, 2024 and approached the UAE for renegotiation.

Import surge

India’s gold imports from the UAE and other countries continued without any slowdown. The surprise came on December 15, 2024 when trade data for November 2024 showed gold imports hitting $14.9 billion — a 331.4 per cent jump from November 2023.

Alarmed by this spike, the government reviewed the data and found a specific error in how it was compiled.

Data correction

On January 8, 2025, DGCI&S revised India’s gold, silver and electronics import data. Imports for April-November 2024 were reduced from $49.08 billion to $37.39 billion, a drop of $11.69 billion (-23.8 per cent). November 2024 imports were cut from $14.86 billion to $9.84 billion (-33.8 per cent), with the growth rate compared to November 2023 dropping from 331 per cent to 185 per cent. Despite the revision, November imports at 117 tonnes remain high, compared to the April-November total of 491.3 tonnes, averaging 61.2 tonnes per month.

The government said the error happened due to a technical glitch during a system change in July 2024 when the trade data reporting for Special Economic Zones (SEZs) was switched from the NSDL system to the Indian Customs Electronic Gateway (ICEGATE). This change caused double counting of gold imports, as both SEZ imports and their clearances into the Domestic Tariff Area (DTA) were mistakenly recorded as separate transactions, inflating the numbers.

However, if DGCIS is receiving both the SEZ import and domestic sales data, it should have cross checked the two datasets before generating Quick Estimates. As a matter of practice transactions reporting import from SEZ to DTA are identified during preliminary checking and excluded before processing. It seems the process has not been properly followed. As SEZ to DTA sales happen across product groups, we hope all such transactions have been verified for double counting.

Also, a deeper question is what qualifies as imports? Gold entering Indian border through a bill of entry filed at Customs alone is country’s import. Movements within the country, such sales from SEZs to domestic area should not qualify as country’s imports and should not be included in total import data. The government must review these concerns to ensure trust in data integrity.

The government announced December 2024 trade data on January 15, 2025. Gold imports in December 2024 were reported at $4.7 billion, less than half of the revised November 2024 imports of $9.8 billion and less than a third of the originally reported November data. Such wide fluctuations must be investigated. Ensuring accuracy of trade data is crucial, as it has been one of India’s most reliable databases.

Import surge continues

Despite the data corrections, gold imports continued to rise in 2024 for several reasons. The reduction in import tariffs made domestic gold prices more competitive with global rates, encouraging legal imports. With stock markets overheating, investors turned to gold as a safer investment option. The ongoing wedding season also boosted the demand for gold bars and jewellery.

Speculation about a potential increase in gold import tariffs in the upcoming Budget 2025 drove traders to stock up on gold, anticipating quick gains. In summary, gold imports in 2024 were influenced by the India-UAE CEPA, changes in import tariffs, and evolving market trends.

While the government’s tariff adjustments provided temporary relief, long-term challenges remain. The rising imports, coupled with reporting errors, have raised concerns about trade data integrity. The government must ensure accurate reporting and consider renegotiating the CEPA to protect India’s revenue and trade balance.

The writer is the founder Global Trade Research Initiative