Structural analysis of Indian gold exports: perspectives for trade policy development

Abstract

Gold is an important trade item, and India is the second leading importer and fifth leading exporter of gold in the world. Though India has a prominent position in the gold trade, it generates huge trade deficient that significantly erode the foreign exchange reserves of the country. This paper attempts to offer policy directions for India’s economic development by limiting imports of gold. The study uses historical trade data from the International Trade Center (ITC) website www.trademap.org. The study adopts descriptives, revealed comparative advantage, future predictions using Markov chain analysis, etc to gain the insights about various trends in India’s gold trade. India’s export of gold jewelry is highly dependent on the United Arab Emirates, and other markets in the Middle East are under-explored. India’s export to major gold importers in the World is meager, and no changes in export directions predicted. For competitiveness, curbing of gold imports is essential. Policy level efforts that discourage the diversion of imported gold to domestic market, attracting domestic gold for export production, limiting gold import licenses to a specific percentage of exports achieved, etc are suitable for a positive change in the trade deficit position in gold trade.