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Jewellers demand Narendra Modi government to cut import duty on gold |
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KOLKATA: India's 2014 gold imports are estimated to have dropped 13% from last year despite a surge in November, data that jewellers hope would encourage the government to consider a cut in the metal's import duty.
Gold attracts 10% import duty in India where most of the demand is met through imports. The duty has been kept high to discourage its imports, one of the top contributors to the nation's current-account deficit. Industry executives expect the fall in imports to help reduce the blame on gold for widening the deficit.
"Imports in 2014 will not be more than 650 tonnes, which is much less than 750 tonnes that we imported last year," Bachhraj Bamalwa, director of the All India Gem & Jewellery Trade Federation, told ET. "This will give a big relief to the government on the CAD front. We now want the government to reduce the import duty on gold to the earlier level of 2%."
The government had increased the duty to 10% in installments, from 2% in early 2012. Gold imports surged 38% from the previous month to 151.58 tonnes in November, as trading houses brought in huge volumes in anticipation that the government would tighten import rules after the current-account gap widened in the July-September period. In the second fiscal quarter, the deficit increased to $10.1 billion, or 2.1% of gross domestic product, from $7.8 billion, or 1.7% of GDP, between April and June.
But much to the surprise of the industry, the government removed the 80:20 rule that the industry had blamed for hurting jewellery trade. The rule, introduced in 2013, was also aimed at bringing down inbound shipments and narrow the current-account deficit. Under it, importers had to ensure that 20% of the gold they bring in was exported after adding value, such as by making jewellery with it. Excess imports in November have resulted in a glut in the market as there are no takers of gold now. Premium - extra money buyers need to pay for quick delivery - has disappeared and importers are being forced to sell gold at a discount.
Ketan Shroff, spokesman for the India Bullion & Jewellery Association, said December imports have fallen drastically to 15-20 tonnes. "There is enough gold in the market but the demand is very slow. We can see some demand coming in if prices come down to Rs 25,000-25,500 per 10 gm.
That can only happen if import duty comes down and the rupee gets stronger against dollar," Shroff said. At present, gold is trading at Rs 26,800-27,100 per 10 gm.
Bamalwa said if import duty is lowered, then the Indian jewellery trade will attract NRI buyers who have now shifted purchases to Dubai and Singapore. "NRI business is a substantially big business for us," he said. According to World Gold Council figures, India's demand for gold in the July-September period rose to 31% in value terms at Rs 56,219.3 crore - jewellery sales rose 51% but demand for gold as investment dropped 16%. Between January and September, demand declined 23% to Rs 155,636.6 crore in value, while volume fell 18% to 619.5 tonnes. Local demand is met through a mix of imported and recycled gold.
Source : economictimes.indiatimes.com
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