The government has hiked import duty on gold and platinum by 50%. The move, which is bound to push up prices of gold and platinum jewellery further, is aimed at curbing gold imports.
Gold contributes the most to India’s import bill after oil, and has added to a widening of the current account deficit and the resultant pressure on the rupee.
Following the hike, import duty, which had already gone up fourfold over the last year to 4%, has risen further to 6%. The hike will push up gold prices by around Rs500, said experts.
Prithviraj Kothari, director at Riddhi Siddhi Bullion, sees prices hitting Rs31,000-31,200 levels. “The move is unlikely to hamper the demand for jewellery. However, the same may prompt more people to smuggle in gold to avoid duties,” he warned.
The Centre has appealed to people to moderate their demand for gold. Gold imports had amounted to $56.5 billion in 2011-12. This fiscal, the imports are pegged at $38 billion as of December 2011.
Amresh Acharya, director, investments, World Gold Council, believes that higher duties on gold imports will not solve the problem. “The century-old cultural affinity that Indians have with gold means they will continue investing in gold. Gold is a protector of asset — an important attribute in times of economic uncertainty — and it plays a crucial role in hedging currency and inflation risks.”