The All India Gem and Jewellery Trade Federation feels the time is ripe to reduce the 10 per cent import duty on gold with the substantial fall in prices leaving little impact on current account deficit.
Speaking to BusinessLine , Sreedhar GV, Chairman, GJF, said on the back of robust demand, the country is expected to import 1,000 tonnes of gold this fiscal against 850-860 tonnes recorded in 2012 when the duty was doubled to 2 per cent to four per cend and progressively it was raised to 10 per cent in 2012-13.
However, today import of 1,000 tonnes of gold will cost $36 billion against forex outflow of $52 billion for importing 860 tonnes as prices have plunged in the last few months.
"It implies that gold does not contribute to worries on current ccount deficit. The Centre was very receptive to our representation to cut Customs duty back to 2 per cent and a decision is expected in this Budget," he added.
The duty cut will also bring down smuggling which is estimated to amount for 20 per cent (about 200 tonnes) of total imports, he said.
In the financial year 2012-13, the Centre raised import duty on gold to 10 per cent after large scale gold imports and fall in exports led to the current account deficit balloon to 4.8 per cent of GDP from 4.3 per cent logged in the same year preceeding financial year.
Since then, CAD has slipped to 1.3 per cent of GDP in 2014-15. It has narrowed further to 1.4 per cent of GDP in the first half of this fiscal from 1.8 per cent recorded in the same period a year ago.
CAD arises when a country's total import of goods, services and transfers’ is greater than exports. Higher CAD leads to a depreciation of currency and strokes up inflation as imports raises.
Urging the Centre to allow jewellers play a major role in collection of gold under monetisation scheme by offering them some commission, Sreedhar said family jewllers, who enjoy unmatched trust among customers can convince them to part with their old jewellery and route them to gold monetisation schem if they are paid about 0.5 per cent commission.
"Instead of focusing only on Hallmarked jewellers who are just 13,000 in number, the Centre should try to attract maximum jewellers in the monetisation scheme by setting some specific criteria on the basis of their ability to handle business and infrastructure available with them," he said.