The Indian government has imposed restrictions on the import of gold jewellery and parts from all countries except the United Arab Emirates (UAE) in response to an unprecedented rise in inbound shipments.
This new policy is intended to regulate the import surge and monitor the flow of gold-related products.
New Import Regulations
The Directorate General of Foreign Trade (DGFT) issued a notification placing items such as finished gold jewellery, gold studded with pearls, diamonds, precious stones, and their parts under the “restricted” category from the previously “free” category. This move requires importers to obtain an import authorisation for these items, increasing scrutiny over their entry.
Surge in Imports
The most significant increase was in gold jewellery parts, with imports rising to $1.55 billion in FY24 from $51.51 million in FY23. The majority of these imports originated from the UAE ($1 billion), Indonesia ($341.9 million), Tanzania ($107.2 million), and Thailand ($35.9 million).
Breakdown of Other Imports
Other items now under the restricted list, including gold studded with pearls, diamonds, and other precious and semi-precious stones, accounted for $543.4 million in imports in FY24. The US was the largest source for gold studded with diamonds, with imports valued at $170.4 million, followed by the UAE at $139.3 million.
Government’s Rationale
A senior government official explained that the restrictions were implemented due to an “unusual surge” in the import of these items, prompting the need to investigate the reasons behind this increase. The decision was made in consultation with the Department of Revenue. “The decision has been taken in consultation with the department of revenue. Part of the imports were coming from the UAE (under FTA). Imports were also coming from other countries (after paying import duty),” the official said.
The official further clarified that these products are not banned but will now be subject to more rigorous monitoring through an import authorisation model. “An import authorisation model will help monitor the situation better,” the official added.
Impact on the Jewellery Industry
This regulatory change is significant for jewellers as it could lead to delays and additional paperwork for importing gold jewellery and parts, potentially affecting supply chains and pricing. Jewellers must now navigate the import authorisation process, which could lead to increased costs and administrative burdens. However, this move also aims to curb illicit trade practices and ensure a more transparent import system.
The exemption of the UAE from these restrictions, due to the free-trade agreement in place since May 2022, indicates the unique trade relationship between the two countries. This exemption may give UAE-based suppliers an advantage over other international suppliers, potentially affecting import dynamics within the industry.
