India's passion for gold has led to a rise in its current account deficit, which reached an all-time high of 5.4 percent of gross domestic product in the July-September quarter.
Alarmed by the mounting current account deficit, driven by large-scale gold imports, the government raised the import duty on gold and platinum to six percent from four percent.
The jewellers in eastern Siliguri city were upset with the step.
They said on Tuesday that their business was already running low because of the high prices of gold and this move will put an end to their business, as the poor and middle class people would not be able to afford the yellow metal and the rich class would head to the showrooms.
"The business was already running low because of the high prices of gold and with the rise of import duty, the prices will escalate, which will have a bad impact on the business," said jeweller Suman Kumar Paul.
The widening current account deficit has increased India's need for foreign capital inflows and evoked memories of the 1991 balance of payments crisis, when the Reserve Bank of India (RBI) sent 47 tonnes of gold to Europe as collateral for a loan to avert a sovereign default.
India has been struggling with a trade deficit that has put the country's current account balance under pressure. To revive exports, the government last month extended an interest subsidy scheme for some exporters.
The customers said they are unable to afford gold even for weddings or occasions.
"We are facing problems as we are unable to afford out desired designs. The rise in prices of gold has made life tough for the poor as they are unable to afford gold during marriages or any other occasion," said a customer, Sumitra Gupta.
India vies with China as top global consumer of gold, and with nearly all demand covered by imports, the country's purchases are a major factor in global prices.
Finance Minister P. Chidambaram had hinted at an increase in tax on January 02, triggering a massive jump in imports, which traders estimate at about 40-50 tonnes in the first week of the month. Premiums charged on London prices rose to the highest level in two months to $2-3 an ounce.