Within months of the CEPA trade agreement being signed, UAE exports of gold bullion to India had already surpassed the 120-ton threshold. These shipments could have easily been substantially higher, but due to the CEPA agreement, the UAE’s annual gold export limit to India is capped at 120 tonnes for the first five years. 200 tonnes per year are added after that.
“Even without the upper ceiling, UAE gold exports to India have already cleared the 80 tonnes of 2021,” said S. Abdul Nazar, Director of the All India Gem and Jewellery Domestic Council, an industry grouping. “Equally important, these UAE shipments come with a 1 percent lower import duty compared to all the other countries – and that’s because of CEPA (Comprehensive Economic Partnership Agreement).”
Switzerland remains India’s biggest sourcing market for the yellow metal, and accounted for 240 tonnes last year. UAE came in second with 80 tonnes.
India is the world’s second biggest gold and jewellery consumer. The government had gone for the duty hike to reduce having to use dollar reserves to pay for all the tonnes of gold reaching the country each year. (It was also felt that higher duties would reduce Indians’ consumption of the metal).
It was in mid-February that UAE and India signed the partnership deal, effectively bringing down import duties across categories. It also eased two-way investments into the economies as well as fast-tracked processes for businesses from one country to make an entry into the other.
On gold bullion imports, this meant a 1 percent break for Indian jewellery firms. And it became more so after India suddenly hiked import duties on gold and precious metals to 15 percent from 10 percent earlier.
Since the announcement of the tariff increase to 15% caught everyone in the industry off guard, the CEPA pact gave all gold importers a 1% discount, according to Nazar. “Because up until that point, jewellers and importers of gold were actually hoping for a duty reduction.
