GoI not to impose fresh import duty on gold

GoI not to impose fresh import duty on gold

In a much-needed respite to the Jewellery and bullion traders, the government has planned not to impose fresh import duties on gold. The decision comes as a relief to many traders who have been concerned about the recent dip in gold prices. The bullion had seen a sharp low after this week’s sell off. Demand for the yellow metal remained weak despite low prices which further hurt market sentiments. With no major festival or wedding season round the corner, an immediate rebound seems a remote possibility.

 The Dollar Business Bureau

Gold is India’s second highest import item in terms of values, and the spike in its imports had widened the current account deficit in 2013, sparking the country’s worst currency turmoil since a balance of payment crisis in 1991. India and China are the world’s largest buyers of gold. But after the massive selling in the Shanghai gold exchange on Monday, the gold prices have seen a downward spiral in the recent past and stooped to a five-year low. Although the traders hoped that the metal would perk up in India or elsewhere in Asia. A fresh round of the purchase of gold is expected from the households, as it is still considered the best and safe investment platform. The current scenario is that the gold prices have dropped to around Rs.25,000 per 10 grams. The government officials have, anyway, acknowledged that the demand for the yellow metal will always remain high and even the gold monetization scheme will have a limited impact. To address the alarmingly high current deficit (CAD) in 2013, the government had hiked the import duty on gold to 10% and also introduced the 80:20 scheme with the condition that any nominated agency could import gold provided it exports 20% of the consignment. However this condition was relaxed in May when premier export houses were given the permission to import gold and Reserve Bank of India sanctioned banks and agencies to import gold for the domestic use. The curb was imposed after there was a spike in smuggling and the expansion of the grey market for the precious metal. World Gold Council Managing Director, estimated that 850-950 tonnes of gold would have got smuggled into India in 2014. India spent a record $15.2 billion on gold imports in April-May 2013, with gold bars selling locally for more than $20 an ounce above the global spot price. That premium at present is just around $1 an ounce. Morgan Stanley estimated that Indian households own around $1 trillion in gold either directly or indirectly, which is about the same as in bank fixed deposits, and against just $400 billion in shares. Though low-cost stockbrokers are looking to use a 42% drop in gold prices over the past four years to lure investors into buying more shares.    

July 23, 2015 | 6:35 pm IST.

The Dollar Business Bureau - Jul 23, 2015 12:00 IST