Nearly 60 times jump in silver imports from UAE unusual: GTRI
- A near 60 times jump in silver imports during the last financial year from United Arab Emirates (UAE) is unusual since the West Asian country does not produce silver
- The import jump may be indicative of a breach in rule of origin finalized by India and UAE under the free trade agreement, a report by Global Trade Research Initiative (GTRI).
Highlights:
- Silver imports from the UAE increased from $29.2 million in FY23 to $1.74 billion in FY24, due to India charging an 8 per cent duty under UAE trade deal versus the earlier 15 per cent Most-Favored-Nation (MFN) tariff on imports from other countries.
- “However, this trade is unusual because the UAE does not produce silver; it imports large silver bars, melts & converts these into silver grains.
- GTRI said a robust monitoring mechanism should be established to track import volumes and values,
- ensuring quick policy responses to unusual spikes in gold and silver imports to ensure compliance with rules of origin under the trade deal.
- “High import duties in India on gold, silver and jewelry at 15 per cent are at the root of the problem.
- The government should consider lowering tariffs to 5 percent which will arrest large-scale smuggling and other misuse.
- The large tariff rate has resulted in a loss of revenue for India of Rs 1,010 crore in FY24 and that the revenue loss could increase as India has committed to make tariffs zero with UAE on unlimited quantities of silver within next eight years.
- In FY24, India imported $5.4 billion worth of silver globally.
- As tariffs drop to zero over the next eight years, most silver imports will likely come from the UAE, causing a revenue loss of Rs 6,700 crore due to the tariff advantage.
- This trade is mainly driven by the lower tariffs offered by India, GTRI said.
Prelims Takeaway:
- Exim Policy
- MFN