Bankers advocate caution on gold duty intervention
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Even as the government is mulling higher duties on gold imports, bankers on Monday said it could impact jewellery exports, advising caution.
"Gold import has also a co-relation with jewellery export. So if we try to bring down gold import, it could also affect jewellery export," State Bank of India chairman Pratip Chaudhuri said after a pre-budget meeting with finance minister P Chidambaram.
Bankers are concerned that exports of jewellery should not join the long list of distressed industrial sectors which have led to a sharp rise in non-performing assets of banks through this fiscal. Both the finance minister and the RBI are, however, on the same page about the need to cut gold imports that totalled $20.25 billion, pushing up the current account deficit to 5.4 per cent of the GDP in Q2 of the fiscal.
While the FM has hinted at hiking import duty on gold, a working group of the RBI has suggested a slew of measures, including financial products that equal returns from the yellow metal.
Jewellery exports constitute 17 per cent of the total exports and employs over 1.5 million people. Already, exports of gems and jewellery's have dropped by 12 per cent to $25.4 billion by November 2012.
Meanwhile, bankers also expressed concern over rising speculation in commodities trading and have sought imposition of the commodities transaction tax (CTT) or abolition of securities transaction tax (STT) on equity markets to bring both markets at par.
"Much of the money that could have been invested in the stock market is now going into this commodity market. Either you have a commodity transaction tax or you abolish the STT," said the SBI chief said.
The finance ministry had in Budget 2008-09 proposed the CTT at the rate of 0.017 per cent but it was later withdrawn following opposition from commodity exchanges as well as concerns by PM's Economic Advisory Council.