In an effort to check fall in rupee value and control current account deficit (CAD), the government may to take certain policy measures to curb high gold imports instead of raising customs duty on the precious metal. Currently, there is a 10% import duty on gold.
As per the government, there is not much scope for hike in import duty on gold. With festive season around the corner, hiking import duty on gold at this juncture might lead to increase in smuggling. Thus, they would take some policy measures to reduce gold import.
Recently, the government announced an array of steps, including removal of withholding tax on Masala bonds, relaxation for foreign portfolio investments, and curbs on non-essential imports, to contain the widening CAD and check the rupee depreciation.
Meanwhile, gold imports jumped by about 93% in August and 41% in July. With the forthcoming festive season, demand for gold is expected to grow further. The country's gold imports, which has a bearing on the CAD, increased by 22.31% to $33.65 billion in 2017-18.