How India raced ahead of China in silver trade

Leftist lawyer Prashant Bhushan, Congress' Jairam Ramesh, and Trinamool Congress' Saket Gokhale took to 'X' to label 'Silver Imports' via Gujarat International Finance Tec-City (GIFT) as a major scam. "Silver Scam Carried Out Through GIFT City," said Gokhale. "Gift City is a huge scam of Lakhs of Crores being facilitated by the PM Modi government," claimed Bhushan. "Astronomical increase in silver imports is taking place through Gujarat's GIFT city. Who is giving the silver gifts and who is receiving them?," questioned Ramesh. These statements highlight a surge in silver imports via GIFT City. But is it a scandal or a success of policy-making? A closer look by those familiar with economic policies, taxation, and global trade reveals how India has managed to checkmate China in the silver trade.

China uses its economic power to push its expansionist agenda. In 2022, China and Hong Kong were the second and third-largest silver exporters globally, with the UK leading. Data shows China and Hong Kong accounted for over 33.66% of India's silver imports in 2022, raising concerns.

How India Managed To Decimate Silver Imports From China

Before 2023, India imposed a 10% customs duty on silver imports. In the 2023 Budget, this duty was raised to 15%, resulting in a significant drop in imports. From 9534 tons in 2022, silver imports fell to 3625 tons in 2023. Imports from China and Hong Kong plummeted from 3210 tons in 2022 to 1156 tons in 2023. The key to this shift was India's CEPA (Comprehensive Economic Partnership Agreement) with the UAE, boosting silver imports from Dubai.

Global trade rules restrict differential duty tariffs, but Free Trade Agreements (FTAs) allow reduced duty rates between two countries. Under CEPA, India can import silver from the UAE at an 8% customs duty, compared to 15% from China. This agreement also benefits jewelry exports to Dubai, as the UAE waives the 5% duty on Indian jewelry. Over the next decade, India's duty on silver imports from the UAE will gradually decrease to zero, eliminating China's silver exports to India - a strategic checkmate.

Is There Really Any Scam In Silver Imports Via GIFT City?

Opposition claims of a silver import scam via GIFT City are baseless. The CEPA agreement allows authorized Indian entities to import bullion from the UAE. Outside GIFT City, banks and institutions can import gold and silver. In GIFT City, registered private entities with the India International Bullion Exchange (IIBX) can import bullion. Domestic banks can also register with IIBX and import bullion. The only advantage of GIFT City is faster customs clearance. Claims of a scam lack merit.

What Triggered The Scam Allegations?

A report by Global Trade Research Initiative (GTRI) titled "FTA led Spike in Gold and Silver Imports from UAE" sparked these allegations. The report fails to address the legitimacy of silver imports via GIFT City and omits the China angle in silver imports, providing a biased view of India's bullion trade. The GTRI report criticizes low tariff imports of gold and silver but ignores CEPA's benefits, such as reduced duty on Indian exports to the UAE and reduced dependence on China for silver.

GTRI's claim of a Rs 1010 crore revenue loss due to tariff arbitrage is misleading. India's conscious reduction of duty under CEPA provides reciprocal trade advantages. The report overlooks the strategic importance of cutting silver imports from China.

Ajay Srivastava, a former Indian Trade Service officer and face of GTRI, offers little transparency about the organization's research methods or experts involved, raising questions about the credibility of the scam allegations.