Duty concessions on gold, which accounts for 80 per cent of India's imports from Peru, is the most challenging issue for New Delhi under the proposed free trade agreement with the South American nation, a report said on Sunday. Economic think tank Global Trade Research Initiative (GTRI) said that gold, a high-value product with low volume, attracts a 10 per cent basic customs duty in India, and even minor tariff concessions could lead to a significant increase in imports.
India and the South American nation Peru are negotiating a free trade agreement to promote bilateral trade and investments between the two countries.
In such pacts, two trading partners either significantly reduce or eliminate customs duties on the maximum number of goods traded between them, besides easing norms to promote trade in services.
The next round of talks is expected to start this week in Lima, Peru.
"Tariff concessions on gold, accounting for USD 1.8 billion or 80 per cent of India's imports from Peru in FY23, is the most challenging issue for India," GTRI founder Ajay Srivastava said.
He argued that after tariff concessions under the India-UAE free trade agreement, gold imports from the UAE, India's second-largest gold supplier, doubled in 2023 compared to 2022.
In 2023, India's global imports of unwrought gold are estimated at USD 43 billion, with Switzerland accounting for 40 per cent of these imports, it said, adding that given Peru's gold mines, its gold would easily meet any Rules of Origin criteria.
"FTAs offer concessions on effective duties rather than on the bound duty. Excluding gold from an FTA would violate the World Trade Organization's Article XXIV, which requires duty cuts on substantial trade for FTAs," Srivastava said.
He also said that India's bound duty on gold is set at 40 per cent, but the current applied tariff is 10 per cent.
"FTAs allow concessions in effective duties and not on bound duty. If the FTA does not include gold, it may not meet the WTO Article XXIV condition for FTAs to have duty cuts on substantial trade," Srivastava said.
He also said that India's bound duty on gold is set at 40 per cent, but the current applied tariff is 10 per cent.
Peru has a bilateral trade pact with major economies like the US, EU, China, Australia, and Singapore. It also has multi-country agreements with the Pacific Alliance (Chile, Colombia, and Mexico) and the Andean Community (Bolivia, Colombia, Ecuador).
These FTAs allow tariff-free imports of most products imported into Peru.
Source Name : Economic Times