India restricts gold jewellery imports from all countries except UAE; here's why

The import of gold in the form of jewellery has been restricted from all countries barring the United Arab Emirates (UAE), as per a notification issued by India's Director General of Foreign Trade (DGFT).

The category of imported jewellery has been changed from "free" to "restricted", according to the notification dated June 11. The order will not be applicable for the imports originating from the UAE as India has a Comprehensive Economic Partnership Agreement (CEPA) with the Middle East country.

As a result of the restriction, gold jewellery imports from all other countries would draw an import duty of 15%. This would, in turn, make the jewellery items costlier for Indians.

The move is expected to benefit domestic jewellery manufacturers, and provide an edge to the UAE-based exporters who sell gold jewellery in India.

Why gold imports have been restricted

While the DGFT notification did not mention the reason behind the decision, experts pointed out that the move is aimed at narrowing trade deficit.

India had, in July last year, eased gold jewellery imports from all countries with which it has a free trade agreement (FTA). Since then, the imports have been on the upward trend.

This resulted in sharp surge in imports from countries like Indonesia and Tanzania, the experts who spoke to news agency Reuters said. The restrictions announced by the DGFT was necessitated as these imports were distorting the market, they added.

Notanly, India's gold imports witnessed a significant increase of 30% in fiscal year 2023-24, reaching $45.54 billion. This growth is attributed to robust domestic demand, primarily from the jewellery sector.

Meanwhile, India's overall trade deficit -- the difference between merchandise imports and merchandise exports -- widened to $19.1 billion in April 2024. This was the highest trade deficit in over five months.