India has seen a dramatic increase in gold imports from the United Arab Emirates, with recent data highlighting a substantial surge. This rise is primarily linked to a one-percentage-point tariff advantage offered under the India-UAE free trade agreement (FTA), despite the UAE not being a gold-producing nation.
In June 2026, India imported gold worth $649.4 million from the UAE, marking a 175.2% jump from $235.9 million in June 2025. In stark contrast, gold imports from the rest of the world declined by 17.7% during the same period, falling from $1.60 billion to $1.32 billion. Over the April-June quarter, imports from the UAE more than doubled, increasing 124.8% to $3.14 billion from $1.40 billion a year prior, making the UAE a principal driver of India's rising gold import bill.
The 1% Tariff Concession Under FTA
Under the India-UAE FTA, gold that meets specified rules of origin can enter India at a 14% tariff, compared to the standard 15% rate. The Global Trade Research Initiative (GTRI) founder Ajay Srivastava points out that this seemingly small 1% difference can be significant in the high-value, low-margin bullion trading sector. The concern is that this preferential tariff might encourage importers to route or source more gold through the UAE, potentially diverting trade.
GTRI has urged the Indian government to review this concession and ensure strict enforcement of the FTA's rules of origin, also calling for scrutiny of gold and silver import concessions extended to the UAE.
Broader Policy Dilemmas and Smuggling Concerns
The debate over the tariff gap unfolds against a backdrop of broader concerns regarding India's overall gold import duties. Some analysts argue that the current 15% import duty could inadvertently incentivize illegal imports. Harshal Dasani, Business Head at INVasset PMS, stated that a 15% duty doesn't stop gold from entering India, but rather dictates whether it arrives through legal customs channels or via smugglers.
Dasani suggested that reducing the duty to 6% could redirect more gold into the legal, GST-compliant, and hallmarked market. He also advocated for leveraging India's vast household gold reserves through initiatives like reviving the Sovereign Gold Bond scheme and improving the Gold Monetisation Scheme, rather than solely relying on import duties.
PM Modi's Appeal and Industry Impact
The surge in UAE gold imports also gains significance following Prime Minister Narendra Modi's appeal to Indians to avoid unnecessary gold purchases, part of a wider push for self-reliance and foreign exchange conservation. This appeal has caused unease within the jewellery industry, particularly ahead of the crucial wedding and festive seasons.
The Chamber of Trade and Industry (CTI) estimates that annual gold consumption could drop from approximately 800 tonnes to 500 tonnes if the slowdown persists, potentially impacting small retailers, manufacturers, and artisans. Policymakers now face the delicate task of curbing gold demand and conserving foreign exchange while ensuring that tariff structures do not create unintended incentives for import diversion or smuggling.