A new report citing a senior government official says India may cut its gold import duty to between 6% and 8% before the end of February.
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.
WSJ.com reports the government is now considering reducing the import tax “as the current-account deficit is estimated to have fallen by almost half to around $45 billion this financial year ending March 31 from $88 billion last year.
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.
But the government import restrictions have led to a scarcity of physical gold inside the country 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.
Despite the curbs Indian consumption still rose by more than 100 tonnes to 975 tonnes last year while according to some estimates “unofficial imports” almost doubled.
The gold trade employ three million Indians and according to polls India’s ruling Congress party is facing defeat at June’s general elections.
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