India and the European Free Trade Association (EFTA) countries -- Switzerland, Norway, Iceland and Liechtenstein -- are in the process of putting in place the free trade agreement, officially known as the Trade and Economic Partnership Agreement (TEPA).
Given a significant increase in imports of the precious metal from some of the free trade pact partners, it will be a little tricky for Indian negotiators to agree to complete elimination of duties on gold from the EFTA group, the government sources pointed out.
India is the world's second-biggest gold consumer after China. The imports mainly take care of demand by the jewellery industry.
The two-way trade between India and EFTA slumped to USD 19 billion in 2016-17, from USD 21.5 billion in 2015-16. The trade gap is highly in favour of the EFTA.
Under a free trade pact, partners offer market access to each other by eliminating or significantly reducing duties with a view to promoting bilateral trade in goods. Besides, both sides liberalise norms to enhance trade in services and shore up investments.
Similarly, the government is exploring ways to curb increase in the imports from Indonesia, which crossed 600 kg during July-August.
Increase in gold imports puts pressure on the country's current account deficit (CAD), which in turn affects the value of the rupee.
Currently, there is a 10 per cent Customs duty on gold imports, in addition to 3 per cent Integrated GST (IGST).