India, UAE Settle Trade In Rupees For Gold Among Other Commodities, Says Official
Trade between India and the UAE for gold is being settled in rupees, according to an official with knowledge of the matter.
Gold is among other commodities, which are traded with UAE, that utilise the rupee settlement as a payment mode, the official quoted above said, while speaking on the condition of anonymity.
In July 2022, the Reserve Bank of India decided to allow the settlement of India’s international trade in rupee.
December trade data showed that import of gold, in particular, witnessed a 156% YoY jump, as compared with the same period last year. In December itself, it came up to $3.02 billion. The export of gems and jewellery have also witnessed improvement in December, although it’s still experiencing an export decline in comparision with last year.
On a month-on-month basis, gems and jewellery exports saw a 14.07% rise, according to Commerce Secretary Sunil Barthwal, who addressed the media during the monthly trade data briefing.
The gems and jewellery category includes gold, silver, pearls, precious and semi-precious stones.
“The improvement in India’s gold exports as well as the increase in our gems and jewellery exports is partly explained by the import of gold using advance authorisation, (subsequent) value addition and re-exporting,” Santosh Sarangi, director general at the Directorate General of Foreign Trade, told media at the same briefing.
Gold is being imported into India under the advance authorisation scheme as gold bars, after which it is being converted as jewellery and exported, he said.
The countries involved are using the special rupee vostro account, which was allowed by the RBI in its circular dated July 11, 2022, he said, without naming the countries.
The advance authorisation scheme allows duty-free import of inputs, which are physically incorporated in an export product, according to the DFGT website.
India and UAE also signed a Comprehensive Economic Partnership Agreement on Feb. 18, 2022, that officially entered into force on May 1, 2022.
CEPA also renders gold cheaper for Indian manufacturers and makes it 1% cheaper (capped at 140 tonne) on imports from UAE. At the same time, Indian jewellery exports to the UAE will be made 5% cheaper in comparison with other competing nations like Malaysia and Turkey.