Can India’s Gold and Silver Imports Help Reduce Its Trade Deficit with the US?

India has a significant trade deficit with the United States, exceeding $43 billion between January and October 2024. The imbalance is particularly stark in the gems and jewellery sector. While the US imported $11.58 billion worth of these commodities from India, its exports to India stood at only $5.31 billion, creating a trade gap of $6.27 billion.

This imbalance has drawn attention due to US policies under President Donald Trump, who has threatened action against countries with large trade surpluses against the US. His administration has also imposed reciprocal tariffs that could further impact India’s exports.

GJEPC’s Proposed Trade Shift

The Gem and Jewellery Export Promotion Council (GJEPC) has recommended that India adjust its gold and silver import strategy to mitigate the trade imbalance. The proposal suggests that India partially shift gold bar imports from Switzerland to the US and silver bar imports from the UK to the US.

Gold Imports: Switzerland vs. the US

• Switzerland currently accounts for 35% of India’s gold imports, equivalent to 261.26 tonnes annually.
• The US contributes just 2.9% to India’s total gold imports.
• GJEPC suggests redirecting at least $6 billion worth of gold imports (approximately 65 tonnes) from Switzerland to the US.

Silver Imports: UK vs. the US

• The UK supplies 41.54% of India’s silver bar imports, while the US share is just 1.61%.
• GJEPC has proposed shifting about $4.15 billion worth of silver imports from the UK to the US.

By making these adjustments, India could potentially reduce its trade deficit with the US while maintaining its supply of precious metals.

The Role of Platinum in Trade Rebalancing

India imports $95.95 million worth of platinum bars annually, and the US has the largest share (16.43%). GJEPC has highlighted that platinum demand is increasing, making it another commodity where India could increase imports from the US to balance trade.

Tariff Reductions: A Step Towards Stability

In addition to shifting imports, GJEPC has proposed reducing import tariffs on gems and jewellery commodities to ensure that India’s exports to the US remain competitive in light of potential reciprocal tariffs.

Proposed Tariff Adjustments:

• Unworked and worked pearls: Reduce or eliminate the 5-10% tariff.
• Polished diamonds, precious and semi-precious stones: Lower tariff from 5% to 2.5%.
• Gold, platinum, and silver bars imported from the US: Reduce the 5% tariff by 1%.
• Gold, silver, platinum, and jewellery articles: Reduce the 20% duty by 3%.

A senior GJEPC executive noted that a 1% reduction in gold, platinum, and silver bar tariffs would align India with its trade agreements with the UAE, where duties are linked to tonnage imported.

Potential Impact on India’s Jewellery Industry

The GJEPC has clarified that reducing tariffs will not lead to an influx of foreign jewellery brands into India. Instead, it aims to create a more balanced trade relationship while ensuring that India’s gems and jewellery exports remain competitive in the global market.

Conclusion

The proposed strategies by GJEPC present a multi-pronged approach to addressing the US trade deficit with India’s gems and jewellery sector. By shifting gold and silver imports, reducing tariffs, and strategically aligning trade policies, India can work towards balancing trade with the US without disrupting domestic markets. However, whether these recommendations gain traction depends on government approval and the evolving global trade landscape.

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