India’s Directorate General of Foreign Trade (DGFT) has paused imports of certain gold jewellery, parts, and alloys—often referred to as “liquid gold”—amid an unusual surge in shipments. This strategic pause aims to address loopholes in trade, curb smuggling, and bring India’s burgeoning trade deficit under control.
🔍 What Was Paused?
- Gold jewellery and parts under five Harmonised System (HSN) codes have been placed under import license control.
- Exemptions will apply to imports under the India-UAE Free Trade Agreement (FTA)—mainly bullion bars, not impacted jewellery parts.
📈 Why Now?
- Sudden import spike
In 2023–24, jewellery-part imports soared nearly 30× (~$1.55 billion) versus the previous year’s $52 million—thanks to tariff loopholes. - Trade deficit pressure
Gold imports contributed to India’s five-month high trade deficit, reaching $19.1 billion in April alone. business-standard - Closing tariff loopholes
Products classified as “platinum alloys” or cheap “findings” exploited lower import duties—creating unfair market distortions. - Strengthening monitoring
By introducing licensing, authorities aim to monitor volumes, source countries, and importer credibility.
🏛️ Wider Policy Context
- The government recently revised November gold import data downward by $5 billion due to accounting errors—showing the magnitude of trade uncertainties. Import volumes remain high overall.
- Earlier in FY24, duty on gold imports was raised to 15% (from 10%) to slow imports triggered by festival demand.
⚠️ Impacts & Concerns
- Price volatility: Limiting imports may raise domestic gold prices.
- Industry impact: Jewellery manufacturers relying on imported parts face disruptions.
- Smuggling risk: Restrictions could push trade underground if compelling enforcement is lacking.
- Foreign trade alignment: The FTA-managed imports may expand, shifting sourcing patterns.
✅ What’s Next?
- DGFT licensing protocols for affected gold items will be implemented immediately.
- Authorities will target smuggling and misuse of treaty benefits.
- Monitoring will continue, and tariff levels or controls may be adjusted based on outcomes.
🔚 Final Take
The Indian government’s pause on “liquid gold” imports reflects decisive action to combat surging jewellery-part shipments, reduce trade imbalance, and curb tariff exploitation. While it introduces tighter controls, the move could stabilize gold trade—provided it doesn’t push demand into hidden channels or hurt manufacturers reliant on imports.
