Thai Gold losing sheen in India - Requests for a fresh polish

Thailand, the emergent South East Asian country is keenly looking forward to resuming its once lucrative gold trade with India. As part of a Free Trade Agreement (FTA), Thailand was a major exporter of coloured gemstone studded jewellery to India, before India increased the import duty on gold from Thailand to 15% from the previous 1%. This move from the Indian Government was meant to protect the nearly 35lakh plus Indian Artisans who specialise in the gold trade. Cheap gold imports from Thailand was definitely upsetting the balance here and a strong decision from the government was expected. Unfortunately, this did not bode well with the fledging gold trade with Thailand.

Now, the Thai government is seeking an intervention from the Indian government. Earlier, while Thai gold imports were charged a 1% import duty, other countries had to pay as much as 10%. At 15% import duty, Thai gold imports are definitely not as lucrative as before. Originally, an Indian trader can import gold from Thailand if the value addition is 20%. However, this mandatory requirement was hardly imposed- traders would routinely route gold jewellery from other sources through Thailand, thereby exploiting the lax regulations. If this regulation was strictly applied, gold jewellery from Thailand will not be so attractive, as then the gold prices in India and Thailand will almost be same. Hence, Thailand is pushing for gold imports under the FTA.

However, it doesn’t look like Thailand’s plea will be acted upon soon. The high import rate for raw gold in India has made the domestic gold costlier. Thus, the Indian government is likely to care about the gold industry in India, before salvaging this precarious situation with Thailand.