While India has bilateral trade agreements with 14 countries or economic blocs, four of the most substantial ones of these have gone back to the drawing board, for review or fine-tuning.
Even the relatively recent pact with the UAE is undergoing a review at the instance of India, reflecting lack of enough detailing before at least some of these agreements were finalised.
In some cases, it became evident with the operationalisation of these agreements that the partner countries carried away most of the benefits in terms of trade on concessional terms.
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In the last 18 months since the India-UAE Comprehensive Economic Partnership Agreement (CEPA) came into force, for instance, there has been a sharp rise in imports of gold, silver and jewellery from Dubai, impacting government revenues and domestic industry.
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Without a review, the damage would have been substantial but early this month at the meeting of the joint committee under the CEPA, UAE agreed to India’s request to exercise greater oversight to ensure that Rules of Origin are not circumvented.
The agreement with UAE contains provisions for unlimited imports of duty-free gold, silver, platinum, and diamonds into India over the next few years. In the first year of the pact, silver imports from the UAE increased dramatically by 5,853%, from $29.2 million in FY2023 to $1.74 billion in FY2024. The import of gold jewellery from the UAE increased by 290%, from $347 million in FY2023 to $1.35 billion in FY2024.
As UAE is not a producer of either gold or silver, much of the exports were made possible by liberal application of Rules of Origin. While India has not asked for any amendment in the concessions to the UAE, the issue of diamond trade in the agreement has been left unaddressed, according to the founder of Global Trade Research Initiative (GTRI) Ajay Srivastava.
India imposes 5% duty on cut and polished diamonds and 0% duty on raw diamonds.
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