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India's gold imports dropped by 4.23% to $12.64 billion during April-July 2024-25 due to global economic uncertainties, contributing to a widened trade deficit. Despite reduced imports, high domestic gold prices and a surge in silver imports marked the period, raising concerns over future trade dynamics, especially with the ongoing India-UAE trade agreement review.

Highlights

Gold Imports Decline: India's gold imports fell by 4.23% to $12.64 billion during April-July 2024-25, impacted by global economic uncertainties. This contrasts with $13.2 billion in the same period last year.

July Import Drop: Gold imports in July 2024 decreased by 10.65% to $3.13 billion, with earlier declines observed in June and May. However, April saw a significant rise in imports.

High Prices Impacting Demand: A jeweller cited high prices as a factor discouraging imports. An uptick is expected from September due to the festive season and the reduced import duty.

Customs Duty Reduction: The government reduced the customs duty on gold and silver from 15% to 6%, which may boost imports in the coming months.

Rising Gold Prices: Gold prices increased by ?300 to ?73,150 per 10 grams in the national capital on August 14, influenced by international market trends.

Trade Deficit Widens: Despite the dip in gold imports, India's trade deficit widened to $23.5 billion in July and $85.58 billion during April-July 2024-25.

Current Account Surplus: India recorded a current account surplus of $5.7 billion in the March quarter, while the CAD for FY24 narrowed to $23.2 billion.

Silver Imports Surge: Silver imports saw a significant rise to $648.44 million during April-July 2024, compared to $214.92 million in the same period last year.

Concerns Over India-UAE FTA: India's review of the free trade agreement with the UAE is critical, as experts raise concerns over a surge in precious metal imports under the pact.

GTRI's Warning: The GTRI warned that the India-UAE CEPA could lead to revenue losses and market shifts if precious metal import duties drop to zero, especially from Dubai.

Conclusion

The dip in gold imports reflects the ongoing global economic uncertainties, yet the rising domestic prices suggest strong underlying demand. The government's recent reduction in customs duty could spur imports during the upcoming festive season. However, the widening trade deficit and the potential impact of the India-UAE trade agreement on precious metal imports necessitate close monitoring. Future policy adjustments and economic trends will play a critical role in shaping the outlook for India's gold and silver markets.

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