India and Peru are set to begin the next round of negotiations in Delhi for a free trade agreement from April 8-11, 2024. The proposed agreement aims to boost bilateral trade and investments by reducing or eliminating customs duties on goods and promoting trade in services. Reducing taxes on gold, which accounts for 80 percent of India’s imports from Peru, is the toughest issue in negotiating a trade deal between the two countries.
The negotiations, which started in 2017 and were paused due to the pandemic, resumed with a virtual round in October 2023. The most challenging issue for India in the agreement is duty concessions on gold, which accounts for 80% of its imports from Peru.
The officials of the two countries concluded the sixth round of talks in Lima, Peru on February 14, 2024, and the focus was to continue the work that started in 2017 when the negotiation process was formally announced.
What happened in the sixth round?
According to officials, in the sixth round, nine working groups held in-person meetings on rules of origin, trade in goods, trade in services, customs procedures, movement of natural persons, trade facilitation, and dispute settlement.
Ahead of the meeting in April, other working groups such as Technical Barriers to Trade, Sanitary and Phytosanitary Measures, Trade Remedies and Cooperation are holding virtual meetings.
Financial Express Online has reported previously that the negotiations for the trade agreement started back in 2017. However, because of the coronavirus pandemic global lockdown, talks were put on a hold and last year officials from the two countries resumed negotiations virtually.
India & Peru & Gold
In the fiscal year 2023, gold made up US$1.8 billion or 80 percent of what India bought from Peru, as per a report by GTRI. Import tax on gold in India is 15 percent, which includes a basic custom tax of 10 percent and an agriculture development tax of 5 percent.
Interestingly, in the recent trade deal with the EFTA bloc (Switzerland, Iceland, Norway, and Liechtenstein), India did not lower tariffs on gold much. Even though Switzerland exported over US$16 billion worth of gold to India in 2022-23, making up 80 percent of its exports, India only agreed to a 1 percent reduction from the 40 percent tariff, keeping the effective tax at 15 percent.
India sees a big opening in increasing trade with Latin American countries, as currently, Indian imports make up less than 2 percent of the total imports there. They aim to double bilateral trade to US$100 billion in the near future.
India exported cars, cotton yarn, and medicine, while Peru sent gold, copper ores, and other items. Peru is keen to sell fruits like avocados, grapes, and blueberries, and products like calcium phosphates to India.
Between 2022 and 2023, India and Peru traded goods worth US$3.12 billion. India sold around US$865.91 million worth of items to Peru and bought goods valued at US$2.25 billion from Peru.