Gold duty hike likely to inflate Indian domestic gold prices

Gold  |  2013-06-07 06:10:04   |   By

The recent decision by the Indian Ministry of Finance to hike the gold import duty from 6% to 8% is feared to create disparity between the international and domestic gold prices.

NEW DELHI (Scrap Monster) : The recent decision by the Indian Ministry of Finance to hike the gold import duty from 6% to 8% is feared to create disparity between the international and domestic gold prices.

The evident after-effect of the import hike decision would be opening up parallel channels of illegal gold import. Some of the nations sharing border with India have no gold import duty in place. According to estimates, smuggling is forecast to constitute nearly 20% of the country’s total gold imports in 2013.In the long run, this will harm not only the economy but also the society.

According to jewellery makers in the country, the new decision by the country’s policy establishment to impose quantitative restrictions on gold is in effect guaranteed to fall short.

The decision to hike the import duty is obviously harmful for jewellery manufacturers who depend on gold imports for their bulk requirement. As imports get costlier, the manufacturers would be naturally forced to pass on the additional burden down the line. Adding to woes, the Reserve Bank of India (RBI) has recently banned almost all gold imports. The supply shortage would eventually inflate the domestic gold prices.