New Delhi, Dec 17 (PTI) India's gold imports have surged alarmingly, posing a potential threat to its trade balance and economic stability, and the government should take action to address this issue, think tank GTRI said on Tuesday.
The country's gold imports in November reached a record high of USD 14.86 billion, registering a four-fold increase, mainly on account of festival and wedding demands, according to commerce ministry data.
Gold imports stood at USD 3.44 billion in November 2023.
The GTRI said that the imports are driven by multiple factors, including growing investment demand, tariff reductions, and loopholes in trade agreements.
This surge has raised significant economic concerns, distorting the trade balance, weakening the rupee, and widening the current account deficit, the Global Trade Research Initiative (GTRI) added.
Gold imports in November accounted for 21.2 per cent of India's total merchandise imports of USD 70 billion.
For the first time, gold surpassed crude petroleum as the country's largest single import item.
"This sharp increase pushed India's monthly trade deficit to its highest level, exerting pressure on the rupee, which has depreciated against the US dollar. A weaker rupee raises import costs further, worsening the current account deficit," GTRI founder Ajay Srivastava said.
He said that most gold enters India as bars and rods with 99.99 per cent purity, but traders are also using other tariff-free or concessional categories to bypass import duties.
The "surging gold imports threaten India's trade balance and economic stability, and urgent action is needed" to address this, he said.
He added that the country's experience with a free trade agreement with the UAE highlights the risks of offering tariff concessions on precious metals like gold, silver, and platinum in FTAs.
"These high-value, low-volume imports disproportionately impact India’s trade deficit and forex reserves, undermining macroeconomic stability. Excluding precious metals from FTAs is crucial to curb speculative imports, safeguard foreign exchange reserves, and protect India’s trade balance and economic resilience," Srivastava said.