India's gold imports could fall much further, by 60% to 70% if the government also presses ahead with plans for gold bonds and a controversial proposed tax amnesty on such investments.
NEW DELHI(BullionStreet): Any further hike in gold import duty could trim India's imports by 25 percent this year, according to All India Gems and Jewellery Trade Federation.
Federation chairman Bachhraj Bamalwa said he believes import duty on gold will be hiked to 6% in the budget scheduled for Feb. 28.
The basic customs duty on standard gold bars is 4 percent and the levy on non-standard gold is 10 percent.
He added that if the government also presses ahead with plans for bullion-backed paper investment products such as gold bonds and a controversial proposed tax amnesty on such investments, imports could fall much further, by 60%-70%.
Increase in duty will make gold costlier and at this price investors will not be interested,he warned.
Outflow of the foreign exchange on account of gold imports is impacting the country's current account deficit which represents the difference between exports and imports after considering cash remittances and payment.
Current account deficit has widened to $38.7 billion or 4.6 percent of the GDP, an all-time high figure, during the first half of the current fiscal.
Of the $71 billion current account deficit , as much as $51 billion is on account of gold imports.
Finance Ministry officials say rising gold import in the past two months is a cause of concern and the government could announce a import duty hike in the Budget.
India's finance minister reignited speculation for another duty hike earlier this month, hinting at cutting gold imports to resolve a record current account deficit that he said is worrying.
Indian households are estimated to have holding up to 25,000 metric tons of gold for generations.