India’s gold and silver imports from the UAE, a key FTA partner, soared 210 per cent to $10.7 billion in 2023-24, raising concerns about unintended consequences of duty concessions under the CEPA trade deal, a report by the Global Trade Research Initiative (GTRI) said on Monday.

The surge has triggered concerns about the effectiveness and potential downsides of India’s free trade agreement (FTA) with the Gulf nation, the report said.

The staggering increase in imports stands in stark contrast to a 9.8 per cent decline in the previous fiscal in overall imports from the UAE, suggesting a significant shift towards precious metals.

Analysts point to concessional duty rates under the India-UAE Comprehensive Economic Partnership Agreement (CEPA) as the primary driver of this surge.

India currently offers a 7 per cent tariff on unlimited silver imports and a 1 per cent concession on the first 160 tonnes of gold imported from the UAE. This creates a significant arbitrage opportunity, making imports from the UAE considerably cheaper compared with other countries.

The report raises several concerns with this trend like loss of government revenue. It said high import duties on precious metals (15 per cent) were intended to generate revenue for the Indian government.

However, the concessional rates under CEPA are leading to a substantial decline in tax collection. GTRI estimates a loss of ₹1.01 billion for silver imports alone in FY24. This decline could have a ripple effect on government spending plans for infrastructure and social programmes.