It’s not just jewellers who are worried by import curbs on gold. India’s trading partners, such as Switzerland, the UAE and South Africa, are apprehensive that the balance of trade could get skewed if the restrictions continue.
Switzerland
India’s trade with Switzerland, which is the biggest supplier of gold to the country, totalled $33.3 billion in 2012-13.
But if inward shipments of the precious metal, totalling $29.5 billion, are taken out of the equation, bilateral trade between the two nations would dip to under $4 billion.
While Switzerland would continue to enjoy favourable terms of trade with India, whose exports to the European nation amounted to just $1.1 billion last fiscal, the situation would be vastly different in the case of the United Arab Emirates, which is the second largest supplier of gold to India.
UAE
Trade between India and the UAE has been by and large balanced, with India enjoying a surplus in 2010-11, but the terms of trade shifting to the Arab country in 2012-13.
But the applecart could be upset if India does not resume gold imports from the UAE, which totalled $10.2 billion last fiscal.
This would tip the balance of trade significantly toward India.
South Africa
A country which is struggling with economic problems of its own, is also likely to be concerned with the abrupt cessation of gold imports by India. The country exported $5 billion worth of gold to India in 2012-13, which constituted over half of its total shipments of $8.9 billion. In contrast, India’s exports to South Africa totalled $5.1 billion, which means the African nation would suddenly find itself in a trade deficit situation if gold imports do not resume. In contrast to these countries, Australia’s trade balance with India is unlikely to be affected by the stoppage of gold imports. Gold exports accounted for just $3.1 billion out of its total shipments of $13.1 billion. India’s exports to Australia just amount to $2.3 billion, which implies that the nation would continue to run a trade deficit with the gold-rich country. The position of the world’s richest economy and India’s fifth-largest supplier of gold, the US, could be ambivalent. The country reaped the rewards of skyrocketing gold demand from India in 2012-13, with its exports shooting up by 275 per cent to $3.4 billion. Nevertheless, it was still faced with a $11-billion trade deficit with India, with its imports amounting to $36.2 billion compared to exports of $25.2 billion.
India’s gold imports fell sharply in August following the imposition of curbs. This might be construed as interventionism or non-tariff barriers by countries from which India is importing gold.
And while none of these countries have raised the issue on an international forum yet, South Africa has voiced concerns over the import curbs on trade between the two nations.