Why has India restricted import of gold jewellery?

Planning to import gold jewellery from abroad?

You’re out of luck – for now.

India on Tuesday restricted the import of certain types of studded gold jewellery, according to several media reports.

But what happened? Why has India restricted import of gold jewellery?

 Let’s take a closer look:

As per News18, the Directorate General of Foreign Trade (DGFT) in a notification stated that  the import policy of gold jewellery studded with pearls, with certain kinds of diamonds, and other precious and semi-precious stones “has been amended from free to restricted” with immediate effect.

Goods under restricted category needs a licence/permission from the government.

There is a 15 per cent duty on gold imports, as per Economic Times.

India has a free trade agreement with Indonesia.

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Sources told the newspaper the ban has been imposed after gold imports from Indonesia under the India-ASEAN free trade agreement spiked.

According to Indian Express, official data showed that the imports of jewellery parts now banned increased 30-fold over the past year.

The figure, which was at $52 million during 2022-2023, increased to $1.5 billion in 2023-2024.

This as jewellery imports in other restricted categories such as jewellery studded with precious and semi-precious stones such as diamonds and pearls occurred for the first time during the last financial year.

India’s total gold imports have also been increasing.

In April, India’s goods trade deficit hit a five-month peak of $19.1 billion – mainly on the back of gold imports.

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India’s gold imports, which were at $1 billion last April, saw a massive increase of 208.99 per cent to hit $3.11 billion this April.

Economic Times reported that some gold items were being brought into India duty-free and being melted to create jewellery.

The move will discourage imports of these items, sources told the newspaper.

“The imports in these categories never happened in such quality. We suddenly saw an unusual surge. A part of it was coming from FTA countries in zero duty. A part was also coming by paying duty. Because of the unusual surge, the commerce ministry consulted with different departments including the Department of Revenue, we decided to put it under a restricted list to better monitor the importers and the countries involved. It is an import authorisation. Traditionally, if jewellery parts are around $50 million and it surges to $1.5 billion, then one has to look into it,” an official told Indian Express.

“The import restrictions on gold jewellery and articles is to accord more protection to domestic jewellers and also to encourage jewellery exports,” an industry source told Hindu Business Line.

In July, the DGFT imposed import restrictions on unstudded jewellery made of gold as well as articles made of gold. Imports under the India-UAE CEPA were exempted.

However, New Delhi has made an exception for gold jewellery under the India-UAE Comprehensive Economic Partnership Agreement (CEPA).

“However import under a valid INDIA-UAE CEPA TRQ (tariff rate quota) shall be permitted without restricted import authorisation,” DGFT added, as per Economic Times.

India’s gold demand rose eight per cent annually to 136.6 tonnes in the March quarter helped by a strong economic environment despite prices touching historic highs, according to the World Gold Council. The aggressive gold buying by the Reserve Bank of India (RBI) also contributed to the rise in demand.

India’s gold demand in value terms rose 20 per cent on an annual basis to Rs 75,470 crore during the January-March period of this year on volume growth as well as a rise in quarterly average prices by 11 per cent.

With inputs from agencies