Gold duty may go up, banks slow coin sales


With gold imports spiking 138% year-on-year in April, driving up the import bill to $7.5 billion, an anxious government may be looking to raise import duty on the precious metal by two percentage points to 8%. The trade deficit for April widened to $17.8 billion compared with $10.3 billion in March, dampening hopes of a meaningful correction in India's current account deficit (CAD), which hit a record 6.7% of GDP in the third quarter of FY13. Senior government officials, however, attempted to play down April's jump in gold purchases, calling it an "aberration".

Nevertheless, given that appetite for the precious metal remains robust and the CAD precarious, it's possible steps will be taken to discourage purchases of gold.

The surge in demand for physical gold last month — after the duty was upped to 6% in January — has been explained by the dramatic drop in global gold prices in the wedding season even as investment demand showed signs of moderating. Economic affairs secretary Arvind Mayaram told reporters it appeared that traders imported large quantities as a hedge against a future rise.

"It's an aberration... But then, there is a limit on how much you can buy and hold. Because there is a carrying cost to that. So, I believe we will see some correction next month. We don't believe imports are going to be at the same level," Mayaram said.

Planning Commission deputy chairman Montek Singh Ahluwalia too said imports should come down by half from last year's levels.

"I would expect in 2013-14, given the changing economic situation, there will be significant easing off of gold imports," Ahluwalia said.

Given the strong appetite in the first four months of 2013, the World Gold Council has estimated that demand would rise marginally to 900 tonnes in calendar 2013 despite several duty hikes. Imports in 2012 were around 862 tonnes. While retail demand shows little sign of abating, there has been a drop in import orders for Swiss branded gold coins sold by banks in India.

... contd.

Please read our terms of use before posting comments
TERMS OF USE: The views expressed in comments published on are those of the comment writer's alone. They do not represent the views or opinions of The Indian Express Group or its staff. Comments are automatically posted live; however, reserves the right to take it down at any time. We also reserve the right not to publish comments that are abusive, obscene, inflammatory, derogatory or defamatory.