Comments
The move to double customs duty on gold will push up retail jewellery prices and depress demand. Higher gold prices have already lowered jewellery demand by 44 per cent to 103 tonnes in the December quarter, according to the World Gold Council data.
Mr Anjani Sinha, Managing Director and CEO, National Spot Exchange, said that for last several years the Chinese Government has promoted investment in gold by its citizens through various means. On the other hand, India has been discouraging gold import to tackle its balance of payment crisis. The move may lead to increase in gold imports through unofficial channels and revenue loss to the Government.
Gold imports declined by 42 per cent in the December quarter due to rising prices and various measures taken by the Government. A record 969 tonnes of gold were imported in 2011 when spot gold prices touched a high of $1,790 a tonne in February.
Illegal channels
Mr Mehul Choksi, Managing Director, Gitanjali Gems, said the Government needs to ensure that the hike in import duty on gold will not encourage illegal imports, which had fallen considerably after rates were reduced some years ago.
In January, the Government had changed the duty structure on gold by applying a variable rate of two per cent on price against Rs 300 for 10 grams. In February, the minimum base price for calculating gold import duty was fixed at $556 for 10 grams.
Means of Investment
Mr Ajay Mitra, Managing Director, India and West Asia, World Gold Council, said that whilst there may be a short-term impact on demand for gold, the fundamental reasons for buying gold jewellery to protect against inflation and use of gold as a monetised asset to secure loans still remains strong.
Due to lower penetration of banking facilities in rural areas, gold and silver are still considered as means to invest, preserve and store wealth. The incentives to the agricultural sector will translate into increased incomes and boost savings, resulting in higher demand for jewellery which is the preferred form of investment for the rural consumer, said Mr Choksi.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.