India gold bar imports plummet but diamonds rock

India's finance ministry, fighting a crippling current account deficit and a weakening currency pushed up gold import duties tenfold – from 1% at the start of 2012 to 10% today.

Other measures including excise duties at 9% and new rules such as strictly cash only for imports, a rule that calls for the re-export of 20% of all imports, transaction taxes and even bans on gold-backed exchange traded fund investments have all stymied India's gold industry.

The measures are having the intended effect with new data from the country's Gems and Jewellery Export Promotion Council showing imports of gold bars fell 47% to Rs32,540 crore ($5.4 billion) in the 2013-14 fiscal year.

With no onerous duties to contend with diamond trading showed robust growth with imports of rough increasing 24% Rs100,374 crore ($16 billion). India is a diamond cutting hub and shipments of cut and polished gems rose 31% to Rs39,586 crore ($6.6 billion).

Government import restrictions have led to a scarcity of physical gold inside India which increased smuggling activity and sent premiums paid over the London price to rocket to as much as $130 an ounce during the gold festivals and wedding season. It has since come down but premiums still hover at the $50 level.

Despite the curbs overall Indian consumption still rose by more than 100 tonnes to 975 tonnes last year while according to some estimates "unofficial imports" almost doubled to more than 100 tonnes.

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