India-South Korea Current Affairs

Government bans import of gold, silver items from South Korea

The Directorate General of Foreign Trade (DGFT) in the Union Commerce Ministry has banned duty free imports of gold, silver items from South Korea.

These restrictions were imposed against the backdrop of sudden surge in imports of precious metals from South Korea, with which India has a free trade agreement (FTA) since January 2010. Now, importers will now have to obtain a license from the DGFT for importing gold and silver from South Korea.

Sudden surge

Under the India-South Korea FTA, India has allowed duty free import of gold and silver items. However, 12.5% countervailing duty was imposed to offset equal level of excise duty on gold and silver jewellery items produced domestically.

After goods and services tax (GST) regime was implemented from 1 July 2017, countervailing duty was abolished as it subsumed excise duty and only 3% GST was imposed on gold. This created a situation where importing gold via South Korea became profitable due to its duty free status with India even as government continued to impose 10% basic customs duty on gold imports from other countries. Between 1 July and 3 August 2017, gold imports from South Korea surged to $339 million against import of only $70.5 million in 2016-17.

Background

India is the world’s second largest gold consumer after China, with consumption of 674 tonnes in 2016. According to the World Gold Council (WGC), India’s gold demand is projected to rise to between 850 tonnes and 950 tonnes by 2020 from an estimated 650-750 tonnes in 2017.

Directorate General of Foreign Trade (DGFT)

The DGFT is the nodal agency responsible for execution of the import and export Policies of India. It is entrusted with responsibilities for formulating and implementing the foreign trade policy with the main objective of promoting India’s exports.

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India-South Korea sign Agreements to Push Infrastructure Development and Bilateral Trade

India and South Korea has signed an agreement for $10 billion assistance for infrastructure development projects in India, including smart cities. It includes $9 billion in concessional credit and $1 billion in Official development assistance (ODA). Part of this fund will be utilised towards Smart City projects in India. With this agreement, South Korea has become one of the first non-G-7 countries to become an ODA contributor in India.

The agreements were signed during the four-day official visit of Finance Minister Arun Jaitley to South Korea to attend the fifth India-Korea Financial Dialogue.

South Korea strives to diversify its economic partnerships and India being world’s fastest growing major economy offers immense opportunities to Korea for diversifying its economic partnerships. This also offers India great opportunities. Both the countries have also decided to establish a mechanism at senior official levels to identify good infrastructure projects in India to make use of the funding.

In the face of rising protectionism, the two countries have also agreed that there is an urgent need for them to increase efforts to stimulate investment flows, support for infrastructure development, and bilateral trade among others

Background

The present engagement between India and South Korea comes under the overall umbrella of the ‘Special Strategic Partnership‘ as declared in the Joint Statement of the Prime Ministers of both the nations in May 2015. Also, recently, a MoU was signed between both the countries for defence industry cooperation in shipbuilding.

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