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Govt raises duty on gold imports to 8%; second time in 6-month

06 Jun 2013 Evaluate

In an attempt to rein in surging demand for the precious metal like gold, the government has raised the import duty to 8% from 6% for the second time in six months. India is the largest consumer of gold and the recent drop in its price has further boosted demand. This move is likely to result in a sharp decline in shipments over the next couple of months.

In May, India’s gold imports touched 162 tonnes, while in April, it was around 100-120 tonnes, higher than the average monthly import level of 70-80 tonnes. Strong demand of gold has become a worrying factor for the Indian policymakers, as the country is facing a record current account deficit (CAD), partly stoked by Indian consumers’ appetite for the yellow metal. The CAD widened to a record high of 6.7% in the third quarter of FY13. 

Recently, the World Gold Council (WGC) report highlighted that India’s gold imports in April-June quarter of 2013 may increase by 200 percent y-o-y to around 300-400 tonnes, which would be almost half the imports of whole of 2012. However, to curb the gold import, the government has been taking steps regularly, including raising import duty. Further, the RBI too had put restrictions on banks on gold imports.  

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