- India’s bullion market is experiencing major disruption as a few private players now handle almost all silver imports from UAE via the GIFT City exchange. This shift could significantly impact exchequer revenue.
- The Global Trade Research Initiative has called for a probe into potential conflicts of interest among export and import firms, warning that similar trends could affect gold, platinum, and diamond markets.
- In May, 87% of India’s global silver imports came from Dubai at an 8% duty, all cleared through GIFT City, effectively sidelining other ports and countries.
GIFT City and India’s First International Bullion Exchange
- GIFT City, located in Gujarat, is India’s first smart city and International Financial Services Centre (IFSC).
- GIFT City offers integrated commercial, residential, and social amenities, attracting international investors with fiscal incentives and regulatory benefits.
- India’s first international bullion exchange, the India International Bullion Exchange (IIBX), launched in GIFT City in 2022, enhances transparency in bullion trading.
- Adhering to global standards, IIBX facilitates efficient price discovery and market access, positioning India as a significant global bullion trading hub.
- India levies a 15% import duty on silver and only allows institutions nominated by the Reserve Bank of India (RBI) and the Directorate General of Foreign Trade (DGFT) to import the precious metal.
- However, the GIFT City exchange does not limit imports to RBI/DGFT-nominated agencies, registers private traders, and has found no rules of origin issues as flagged by customs elsewhere.
- Under the CEPA signed in 2022 with UAE, India has agreed to reduce the duty on silver imports to 0% over 10 years, subject to Dubai exporters meeting the rules of origin conditions.
- As the tariff becomes zero over the next eight years, all silver imports will likely come from the UAE, resulting in a revenue loss of ₹6,700 crore.
Dig Deeper: List the top five import and export items of India with reference to value.
