Import duty on Gold hiked
With spiralling demand for gold draining huge amount of foreign
exchange, government hiked the import duty on it from 4 to 6 per
cent, a decision that immediately sent prices shooting up.Simultaneously, the government also raised the duty on platinum
by a similar percentage from 4 to 6, as government appealed to the people to
moderate their demand for gold.
Shortly after news of the duty hike, gold prices shot up by Rs 315 to Rs 31,250 per 10 grams and markets sources say it may go up by Rs 700 per 10 grams in the short term.
For the second time in a year, the import duty on gold has been hiked to check the spiralling trend of gold imports leading to a record current account deficit that has a cascading effect on various economic fronts including distorting the balance of trade.
Prices would be a concern to the government if this prices was to impact inflation. Gold is not part of inflation index. If a part of gold lying in stock would be brought in circulation and would practically meet the requirements of the gems and jewellery trade leading to a moderation in the quantity of gold that is imported into the country. India spent a whopping USD 56.5 billion on gold imports in 2011-12 and USD 38 billion in the first nine months of current fiscal. The hike in duty may moderate demand in the world's largest bullion buyer that has seen prices jump 7.1 per cent in 2012.
Outflow of the foreign exchange on gold imports is impacting country's CAD, which has widened to USD 38.7 billion or 4.6 per cent of the GDP in the first half of the current fiscal. About 80 per cent of the nation's current-account deficit, the broadest measure of trade, tracking goods, services and investment income, is due to gold imports, according to the Reserve Bank of India.
Shortly after news of the duty hike, gold prices shot up by Rs 315 to Rs 31,250 per 10 grams and markets sources say it may go up by Rs 700 per 10 grams in the short term.
For the second time in a year, the import duty on gold has been hiked to check the spiralling trend of gold imports leading to a record current account deficit that has a cascading effect on various economic fronts including distorting the balance of trade.
Prices would be a concern to the government if this prices was to impact inflation. Gold is not part of inflation index. If a part of gold lying in stock would be brought in circulation and would practically meet the requirements of the gems and jewellery trade leading to a moderation in the quantity of gold that is imported into the country. India spent a whopping USD 56.5 billion on gold imports in 2011-12 and USD 38 billion in the first nine months of current fiscal. The hike in duty may moderate demand in the world's largest bullion buyer that has seen prices jump 7.1 per cent in 2012.
Outflow of the foreign exchange on gold imports is impacting country's CAD, which has widened to USD 38.7 billion or 4.6 per cent of the GDP in the first half of the current fiscal. About 80 per cent of the nation's current-account deficit, the broadest measure of trade, tracking goods, services and investment income, is due to gold imports, according to the Reserve Bank of India.
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