New Delhi – Gold imports into India from the United Arab Emirates (UAE) through the preferential quota system under the Comprehensive Economic Partnership Agreement (CEPA) have largely ceased. Government and industry sources indicate that the CEPA route for gold imports is effectively closed, primarily due to legal challenges concerning the allocation of quotas by the Directorate General of Foreign Trade (DGFT).
This development occurs as India grapples with managing its foreign exchange reserves and current account deficit. On May 12, the Centre significantly increased the customs duty on gold and silver, doubling it from 6% to 15%. This measure was implemented amidst concerns over the West Asia crisis and a broader effort to curb imports of precious metals.
Impact on Gold Imports
Despite the duty hike, there were initial concerns that the India-UAE CEPA, which grants preferential access, could still lead to elevated gold and silver imports. Under the agreement, gold imports from the UAE were allowed at a tariff one percentage point below the normal Most-Favoured-Nation (MFN) rate through a Tariff Rate Quota (TRQ) system.
However, industry insiders confirm that importers have not been utilizing this tariff rate quota. While gold continues to be imported from the UAE, it is occurring through regular channels, bypassing the trade deal's preferential terms due to the unresolved court cases. India also sources gold from other countries, notably Switzerland.
Government Measures and Market Response
Beyond the duty increase, the DGFT has implemented additional restrictions. Silver has been moved to the restricted import category, requiring importers to obtain a license. Furthermore, duty-free gold imports under the advance authorization scheme have been capped at 100 kg per license.
Official data reveals India's total gold imports stood at 795 tonnes in 2023-24 and 757 tonnes in 2024-25. The share of imports under the TRQ mechanism was relatively small, accounting for only about 5% (40 tonnes) in FY24 and 18% (140 tonnes) in FY25. For FY26, the allocated TRQ quantity was 8.58 tonnes. The DGFT had previously extended the validity of TRQ authorizations for gold under CEPA until June 30 due to ongoing geopolitical issues.
Sources suggest that the higher import duty has contributed to a reduction in gold imports over the past month. However, experts note that curbing gold imports in India remains challenging due to the metal's deep cultural and economic significance as an investment, safe haven, and essential component for auspicious occasions and weddings. India is the world's second-largest gold market, importing 45.6 tonnes in April. Industry sources also report that alongside the duty hike, lower consumer demand has led to existing gold stock remaining in the country.