India curbs gold imports to check rising Indonesian shipments

Subject : Governance / IR

Concept :

The sudden spurt in duty-free imports of gold jewellery from Indonesia under the free trade agreement was one of the main reasons for the Indian Government’s decision to ban shipments of certain gold jewellery products.
The Government suspects that gold is being re-routed into India from other countries without payment of any duty under the India-ASEAN free trade agreement as Indonesia was never known for exporting gold jewellery to India.
In a notification, the Directorate General of Foreign Trade amended the import policy for unstudded jewellery made of gold and other gold articles to “restricted” category from “free”.

India-ASEAN Free Trade Agreement

The initial framework agreement for ASEAN–India Free Trade Area (AIFTA) was signed on 8 October 2003 in Bali, Indonesia.
The FTA came into effect on 1 January 2010.
The FTA had emerged from a mutual interest of both parties to expand their economic ties in the Asia-Pacific region.

Background of the AIFTA

India’s Look East policy was reciprocated by similar interests of many ASEAN countries to expand their interactions westward.
After India became a sectoral dialogue partner of ASEAN in 1992, India saw its trade with ASEAN increase relative to its trade with the rest of the world.
Between 1993 and 2003, ASEAN-India bilateral trade grew at an annual rate of 11.2%, from US$2.9 billion in 1993 to US$12.1 billion in 2003.
Total Indian FDI into ASEAN from 2000 to 2008 was US$1.3 billion.
Acknowledging this trend and recognising the economic potential of closer linkages, both sides recognised the opportunities to pave the way for the establishment of an ASEAN–India Free Trade Area (FTA).

Structure of the AIFTA

The signing of the ASEAN-India Trade in Goods Agreement paves the way for the creation of one of the world’s largest FTAs – a market of almost 1.8 billion people with a combined GDP of US$2.8 trillion.
It sees tariff liberalisation of over 90 percent of products traded between the two dynamic regions, including the so-called “special products”.
The products include palm oil (crude and refined), coffee, black tea and pepper.