MONEY9: The government took a big decision in the first week of July itself and gold (GOLD)import of (IMPORT) Increased the zakat. The government intends to reduce gold imports, curb the trade deficit and put a brake on the depreciation of the rupee.
Rising import of gold worrisome
India imported 107 tonnes of gold in May, raising the government’s concern and hence, the government increased the import duty on gold. Earlier, 10.75 percent duty was levied on gold import, which has now increased to 15 percent.
The decision to increase import duty is justified
Considering the trade deficit and the depreciation of the rupee, the decision to increase the import duty on gold seems justified. The trade deficit hit a record high of $25 billion in June. Imports of crude oil and gold are major contributors behind this huge increase in trade deficit. Gold imports grew by 169 percent in June and imported gold worth more than $2.61 billion. Even as the trade deficit widens, the rupee continues to weaken. The rupee fell to a record low of 79.48 against the dollar on July 11.
Impact on gold prices
However, the government’s decision has added to the woes of consumers as gold prices have shot up to Rs 1,500 since the government hiked import duty. Before the import duty hike, gold was hovering around Rs 50,600 on the commodity exchange MCX, which later rose above Rs 52,100.
Expert opinion
Indian Bullion Jewelers Association spokesperson Kumar Jain says that the increase in duty on gold imports may encourage gold smuggling in India. Gold price in Dubai is around Rs 46,500 in Indian currency and in India this price is Rs 53,500. That is, there is a difference of about 7 lakh rupees per kg. This figure is enough to encourage smuggling of gold from abroad.
Impact on the jewelery market
The rise in import duty has pushed up gold prices and may have an impact on jewelery demand. India’s jewelery industry is looking forward to the wedding season to get out of the Corona epidemic, there is a possibility that their hopes will be dashed due to the rise in gold prices.
. Source