India is considering withdrawing some products from the Free-Trade Agreement (FTA) with Thailand after facing a huge trade deficit, with gold likely to be excluded from the pact.
Somkiat Triratpan, deputy director-general |to the Trade Negotiation Department, said |that India had asked Thailand to review the FTA in order to reduce its trade deficit with the Kingdom.
India suspended an exemption on tariff for Thai gold from the agreement in February last year, leading to lower exports of gold from Thailand to India.
The Directorate of Revenue Intelligence (DRI) under India’s Finance Ministry, which controls import inspections and control of illegal goods, wants India to review the FTA with many countries, including Thailand. The agency has proposed increasing the power of the tax collection agency to immediately ban any imports automatically if it finds some problems such as the rule of origin.
According to the department, trade between Thailand and India grew continuously after the FTA. Last year, Thai exports to India were valued at US$5.4 billion, while imports were valued at $3.4 billion. India, thus, faced a trade deficit with Thailand.
India has levied a low import tariff on Thai gold of only 1.01 per cent, while the normal tariff is 15 per cent. This has led to some traders using the opportunity to export gold under the Thailand-India FTA.
India has started to collect the higher tariff on Thai gold since February last year, citing unclear rules of origin. As a result, Thai gold shipped to India was valued at only US$9.37 million in 2013, down sharply from $123.95 million in 2012. Gold ornaments exported to India also dropped from $52.73 million in 2012 to only $1.48 million last year.
India has not only stringently limited gold imports from Thailand but also other countries |in order to reduce its huge trade deficit. Last |year, gold imported from India was down largely by 88 per cent. Other major gold suppliers to India are the United Arab Emirates and Hong Kong.
Somkiat said Indian people favour Thai gold ornaments because of the good quality and beautiful designs. With the low tariff, the demand for Thai gold in India is high.
To ensure that Thai gold exports to India do not face any problem, Somkiat urged traders to stringently stick with the rules of origin.