SILVER SCAM: "Is there a Chandi Ghotala?" Jairam Ramesh on "gigantic jump" in Silver imports from UAE.
Chandi Ghotala (in India) translates to Silver Scam
Congress Leader Raises Concerns Over Surge in Silver Imports from UAE.
Congress General Secretary Jairam Ramesh has raised questions about a dramatic increase in India's silver imports from the United Arab Emirates (UAE), suggesting the possibility of a "chandi ghotala" or silver scam.
According to Ramesh, India's silver imports from the UAE skyrocketed from a modest USD 2.2 million between January and April 2023 to an astonishing USD 1.44 billion during the same period this year. This represents a staggering 654-fold increase in just one year.
The surge in silver imports follows the implementation of the Comprehensive Economic Partnership Agreement (CEPA), a free trade agreement between India and the UAE that came into effect on May 1, 2022.
The agreement offers certain concessions that may have contributed to this dramatic rise.
Government data indicates that overall silver imports grew tenfold during the first four months of 2024, reaching USD 3.16 billion. The UAE has now become India's largest source of silver imports, accounting for 45% of the total.
This is particularly noteworthy as the UAE was not even among India's top five import partners for silver just a year ago.
The imported silver products from the UAE are primarily silver grains, which are mainly used in jewelry production. The Indian government is reportedly concerned about this sudden spike and is likely to address the issue with UAE authorities.
The Commerce Department is currently investigating the reasons behind this surge, especially considering the stringent rules of origin and the 3% value addition norms agreed upon under the trade deal. A meeting between Customs officials and the Department of Commerce has already taken place to discuss the matter.
Ramesh drew parallels between this potential "silver scam" and the controversial electoral bond issue, implying that both situations warrant scrutiny. As the government continues its investigation, the dramatic increase in silver imports from the UAE remains a topic of concern and speculation.
What are the potential consequences of this surge in silver imports for India's economy
The surge in silver imports from the UAE to India has several potential consequences for India's economy:
Trade imbalance: The dramatic increase in silver imports could lead to a widening trade deficit with the UAE, potentially impacting India's overall balance of trade.
Revenue loss: India typically imposes a 15% import duty on silver. However, the Comprehensive Economic Partnership Agreement (CEPA) with the UAE offers certain concessions, which may result in reduced customs revenue for the Indian government.
Market disruption: The sudden influx of silver could disrupt the domestic silver market, potentially affecting local producers and traders.
Currency pressure: Increased imports may put pressure on the Indian rupee, as more foreign currency is needed to purchase these imports.
Regulatory concerns: The government is investigating the reasons behind this surge, particularly in light of the rules of origin and value addition norms agreed upon under the CEPA. This could lead to stricter regulations or renegotiation of trade terms.
Impact on domestic jewelry industry: As the imported silver is primarily in the form of silver grains used in jewelry production, this could affect the competitiveness of domestic silver suppliers to the jewelry industry.
Potential for illicit trade: The dramatic increase has raised concerns about the possibility of trade-based money laundering or other illicit activities, which could have broader economic and regulatory implications. Silver Academy reporters have shown that India’s Rajesh Exports (from their website they appear to be in the “jewelry” business) are one of the World’s largest manufacturers of Silver Zinc batteries for torpedoes (some of use 11,000 ounces of silver per torpedo)
Diplomatic considerations: The Indian government plans to discuss this issue with UAE authorities, which could impact diplomatic and economic relations between the two countries.
Banking sector implications: Some Indian banks have halted silver imports due to the duty differential, which could affect their business operations and profits in this sector.
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Check out how large these silver zinc batteries are! (they require lifts by hooks, pulleys, chains and forklifts)
For context, review our post earlier this morning
This morning we wrote:
Sources -
https://economictimes.com/news/economy/foreign-trade/india-imports-more-silver-in-4-months-than-in-all-of-2023/articleshow/110535274.cms
https://www.business-standard.com/economy/news/india-to-discuss-silver-import-spike-with-uae-amid-growing-concerns-124062800834_1.html
https://www.reuters.com/business/finance/indian-banks-halt-silver-imports-duty-differential-spurs-private-trade-2024-03-14/
https://economictimes.com/news/economy/foreign-trade/indias-february-silver-imports-hit-record-and-set-to-rise-66-this-year/articleshow/109133286.cms
https://kitco.com/news/article/2024-04-09/indias-silver-imports-skyrocket-february-now-pace-66-increase-2024
https://theprint.in/economy/is-there-a-chandi-ghotala-jairam-ramesh-on-gigantic-jump-in-silver-import-from-uae/2153575/