The sudden spurt in duty-free imports of gold jewellery from Indonesia under the free trade agreement was one of the main reasons for the Indian Government’s decision to ban shipments of certain gold jewellery products.
The Government suspects that gold is being re-routed into India from other countries without payment of any duty under the India-ASEAN free trade agreement as Indonesia was never known for exporting gold jewellery to India.
Indonesia shipped out 3-4 tonnes of gold articles and jewellery in last 2-3 months which raised alarm bell among policy makers, who are trying to curtail current account deficit by restricting non-essential imports. Once in India, the gold articles can be melted and converted into jewellery.
The Government on Wednesday imposed restrictions on imports of certain gold jewellery and articles. In a notification, the Directorate General of Foreign Trade amended the import policy for unstudded jewellery made of gold and other gold articles to “restricted” category from “free”.
However, it said import under the India-United Arab Emirates Comprehensive Economic Partnership Agreement would be allowed without any license.
Kumar Jain, spokesperson, Indian Bullion and Jewellers Association of India, told businessline that when shipments from other countries were attracting a duty of 15 per cent, imports from Indonesia was cheaper and there was a gradual rise in imports from Jakarta.
The Government has now plugged the loophole at the time when the gold jewellery demand is looking up with the deadline for withdrawal of ₹2,000 coming closer, said Jain.
In first two-months of this fiscal, India imported articles made of gold worth $112 million and of this $76 million was from Indonesia, said trade sources.
On the other hand, gold imports contracted by about 40 per cent to $4.7 billion in the same period while pearls, precious and semi-precious stones imports dipped 25 per cent to about $4 billion.
Colin Shah, Managing Director, Kama Jewellery, said though the steps by the government is to balance the macroeconomics, gold, a key raw material, should be made available at reasonable price for the gems and jewellery industry to maintain the competitive edge for exports.
Despite the CEPA pact to boost trade relations, he said gold imports from the UAE have been dismal.
The Government has recently approved large jewellery exporters to import 140 tonnes of gold from the UAE at concessional rate of one per cent. Malabar Gold and Diamonds, which was the first to import gold under the pact, placed orders for import 25 kg of gold through ICICI Bank.