The UAE is likely to take up the issue of prevailing “high import duty” on gold in India during the visit of PM Narendra Modi, even as New Delhi is planning to seek huge investments from the Gulf nation into India’s infrastructure sector, as well as take advantage of lower crude oil prices by sourcing more oil from the region.
During his two-day visit (August 16-17), Modi would reach out to the over 2.5 million Indians in the UAE, whose remittances to India were estimated at over $12 billion last year. Sources said while India is looking to attract investment from UAE’s sovereign wealth funds into the infrastructure sector, the UAE is seeking investments from India into its free trade zones.
Sources familiar with the development told FE that the UAE is expected to ask India to reduce high basic customs duty on gold (currently at 10%, up from just 2% in January 2012), a demand which also has the support of the Indian gems and jewellery sector, as the yellow metal is imported into India, value added and then exported to markets overseas. India’s gems and jewellery exports had contracted by 3.8% to $41.7 billion in FY14. In April-June this fiscal, exports from the sector shrunk 6.1% over the same period last fiscal to $1.4 billion.
UAE’s gold exports to India have fallen from $10.4 billion in FY12 to $4.1 billion in the last fiscal, though it is part of a trend of India’s overall imports of the yellow metal slipping from $56.5 billion to $34.4 billion in the same period.
After oil, gold and jewellery products account for the biggest chunk in UAE’s exports to India.