Gold exports from the UAE to India could see a significant rise in the coming months and years, with India set to allow domestic jewellery firms to directly import the yellow metal under its first global gold exchange — India International Bullion Exchange (IIBX).
The new bullion exchange, aimed at creating a regional bullion hub in the South Asian country, is to be inaugurated on Friday.
So far, only a few select banks and nominated agencies approved by India’s central bank – the Reserve Bank of India – could undertake gold imports.
The UAE is the second-largest exporter of the precious metal to India, while it is the largest market for Indian gold jewellery.
The new gold exchange will allow qualified jewellers to directly import gold, widening the importer base in the world’s second-biggest consumer market.
An official with IIBX told Arabian Business that gold delivery from the UAE on the exchange is expected to be allowed soon, as the exchange is currently awaiting permission for it from the regulator – International Financial Services Centres Authority (IFSCA).
“As of now only LBMA (London Bullion Market Association) approved gold bars are allowed for delivery at IIBX. We have sought approval for UAE gold delivery from the regulator and the approval is expected any time now,” the exchange official, who wished not to be identified, said.
“We expect gold import from UAE through the exchange to commence shortly,” the official said, adding that once it is allowed it could lead to a rise in gold imports from the Gulf country as jewellers would prefer it because of its geographical proximity to India.
The official also said the exchange has sought regulatory approval for gold imports from the UAE under the recently signed Comprehensive Economic Partnership Agreement (CEPA) with India.
India has extended a 1 percent duty concession for gold imports from the UAE for up to 200 tonnes of inbound shipments, while jewellery exports to UAE attract zero duty under the bilateral economic pact, signed on February 18.
Industry executives said over 60 leading jewellery firms in India have so far joined the new bullion exchange, which will lead to them undertaking gold imports as well.
“Yes, our members are applying in large numbers [for import permits on IIBX],” Surendra Mehta, Secretary, Indian Bullion and Jewellers Association (IBJA), told Arabian Business.
More jewellery firms are expected to join the exchange and seek permission for direct import of the yellow metal.
Mehta, however, said relaxation of import permits may not lead to a major jump in import of gold.
“Import levels will depend on the demand situation in the Indian market,” he said.
Mehta said the new exchange will help the members of the jewellers body to undertake imports as and when demand rises, without depending on banks or other designated agencies.
India has raised the basic import duty on gold to 12.5 percent from 7.5 percent early this month, leading to apprehensions of a slowdown in the import of the yellow metal.
Mehta, however, said lower or higher import duty does not affect gold demand in the country and imports would move in tandem with the domestic demand.
The World Gold Council expects gold demand in India to be steady around 800 tonnes this year.
India’s gold imports have seen a surge in recent months, hitting 98 tonnes in May, significantly higher than the 27.1 tonnes imports in April this year and 11.4 tonnes in May 2021, according to the World Gold Council.
The UAE has issued a new set of due diligence regulations recently for responsible sourcing of gold, in line with its efforts to consolidate the country’s position as a major player in supply chains and global trade networks for the gold sector.
India, the second-largest consumer of gold after China, also exports over 75 percent of its jewellery exports to the UAE.
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