Finance minister Arun Jaitley may give the Rs 2,51,000 crore worth domestic gems and jewellery industry, gold importers, and consumers some reason to cheer about. The ministry is likely to reduce the gold import duty by 2-4% from 15% now. This may form a part of the Budget announcement of finance minister Arun Jaitley.
A senior ministry official told dna on condition of anonymity, "We are examining the possibility of a cut in the gold import duty in the range of 2% to 4%. There is a high likelihood that a calibrated approach to curtailing the import duty on gold may be taken beginning from two per cent cut. The forex situation will be monitored closely after the cut, before any further decision is taken."
This may come as a change of stance with the new government taking over, as during the UPA regime, then finance minister P Chidambaram did not even entertain UPA chairperson Sonia Gandhi's request on gold import duty cuts. Former minister of state in finance ministry JD Seelam also announced in Rajya Sabha that the government has no plans to cut import duty.
The government is also revisiting the 80:20 curbs mandating that 20% of the imported gold has to be compulsorily exported. These restrictions were imposed by the government in the wake of the rupee crisis that saw the currency plummeting against the dollar in August last year.
Gems and jewellery sector forms almost 7% of the GDP and employs around thirteen lakh people in the country. India is the largest consumer of gold, accounting for 20% of the world demand.
It is the comfort on the recent current account deficit or CAD numbers, which is prompting the government to take a decision that could in turn give a fillip to the gems and jewellery export sector. The current account deficit has narrowed to 1.7% of the GDP in 2013-14, compared with 4.7% in the fiscal before that. In addition to that, the government has added $15 billion to the reserves in 2013-14.
The RBI has of late given enough signals that the government is ready to take a strong step on the gold imports. It recently allowed the trading houses apart from banks to import gold to boost the export oriented sectors. The finance ministry too has blinked by reducing the import tariff value on gold and silver. Industry body Assocham has also pitched for a 5% rate cut in the import duty on the bullion.