SEATTLE (Scrap Monster): According to latest government notification, India has raised import duty on gold from 10.75% to 15% effective yesterday, 30th June. The move is aimed at checking current account deficit (CAD) and rising imports of the metal.
The basic customs duty on gold, 7.5% until now has now been raised to 12.5%. This along with 2.5% agriculture infrastructure development cess (AIDC) now makes the effective customs duty on gold imports to 15%.
The notification by the Finance Ministry said that there has been a sudden surge in gold imports during the recent months. The country imported a total of 107 tonnes of the yellow metal in May this year. The imports continued their strong trend in the month of June as well. This has put tremendous pressure on the CAD situation of the country, it noted. The country’s current account balance hit a deficit of 1.2% of the GDP in FY22, compared to 0.9% surplus in FY21.
The majority of gold needs of the country are met through imports. This in turn has put pressure on the Indian currency, which recently fell to historic lows. The surprise move by the government is expected to stem inflows of gold into the country, thereby helping it to improve the trade imbalance. Incidentally, the gold imports to the country have been on a rising trend over the past few years, hitting the highest level in a decade in 2021.