Trade between India and the UAE involving commodities such as gold is now settled in rupees, according to an anonymous official familiar with the matter. The Reserve Bank of India’s decision in July 2022 to allow the settlement of India’s international trade in rupees has facilitated this arrangement. In December 2022, gold imports saw a significant year-on-year increase of 156%, reaching $3.02 billion. The export of gems and jewelry also showed improvement in December, experiencing a 14.07% month-on-month rise. This category includes gold, silver, pearls, precious and semi-precious stones.
Santosh Sarangi, Director General at the Directorate General of Foreign Trade, explained that the boost in India’s gold and gems and jewelry exports is partly attributed to the import of gold under the advance authorization scheme, subsequent value addition, and re-exporting. Gold is imported as bars, converted into jewelry, and then exported. The countries involved are utilizing the special rupee vostro account, permitted by the RBI in a July 11, 2022 circular. The advance authorization scheme allows the duty-free import of inputs incorporated into an export product.
India and the UAE signed a Comprehensive Economic Partnership Agreement on February 18, 2022, which came into force on May 1, 2022. This agreement not only makes gold cheaper for Indian manufacturers, with a 1% reduction on imports from the UAE (capped at 140 tonnes) but also renders Indian jewelry exports to the UAE 5% cheaper compared to other competing nations such as Malaysia and Turkey.
