The sixth round of negotiations for the India-Peru Free Trade Agreement (FTA), will begin next week in Lima, with India expecting the comprehensive pact to help expand its foot-print in Latin America, but increased market access for gold is likely to emerge as a tricky area, as per research body, Global Trade and Research Initiative (GTRI).

“After tariff concessions under the India-UAE Free Trade Agreement, gold imports from the UAE, India’s second-largest gold supplier, doubled in the calendar year 2023, compared to 2022. 

Peru, the fifth-largest supplier to India, could see a similar surge in gold imports, if the right concessions are made,” a GTRI paper on India’s FTA negotiations with Peru pointed out.

Gold is the single biggest item for import from Peru for India. In FY23, the yellow metal accounted for $1.8 billion or 80 per cent of India’s imports from the country, the paper noted.

India, at present, imposes a 10 per cent basic customs duty on gold and even small tariff concessions could lead to a significant increase in imports. This is because, it is a high-value product with low volume, it added.

New Delhi will thus, need to negotiate nimbly on gold, as Peru is likely to persuade the country to offer import duty cuts. The sixth round is to begin on February 12.

India already has limited trade pacts (Preferential Trade Agreements) with Chile and the Mercosur bloc  (Argentina, Brazil, Uruguay, Paraguay), but the proposed India-Peru FTA, will be India’s first comprehensive FTA in the region. While the pacts with Chile and Mercosur primarily included tariff concessions on selected goods, the India-Peru FTA has a broader scope and also includes services. “This move underlines India’s strategic interest in expanding its trade footprint in Latin America, leveraging Peru as a pivotal partner in this endeavour,” the GTRI paper stated.

Bilateral trade between India and Peru has been steadily growing, according to the Commerce Department.

During FY 2022-23, the bilateral trade volume reached $3.12 billion. India exported goods worth $865.91 million to Peru and imported goods valued at $2.25 billion from the country, as per government data. Key Indian exports to Peru include motor vehicles/cars, cotton yarn and pharmaceuticals, while Peru primarily exports gold, copper ores and concentrates.

The proposed India-Peru FTA includes chapters such as Rules of Origin, Trade in Goods, Customs Procedures and Trade Facilitation, Technical Barriers to Trade, Sanitary and Phytosanitary Measures, General and Security Exceptions, Cooperation, Legal and Institutional Issues, Dispute Settlement, Services, Movement of Natural Persons, Trade Remedies and Investment.