India: Gold industry cries foul of government’s move to curb imports.

MUMBAI: Stakeholders of India’s gold industry are crying foul of the government’s various decision, including increasing import tax for the commodity in an attempt to reduce the country’s whopping current account deficit.

India, the world’s largest bullion buyer, recently increased import duty on gold and silver jewellery from 10 per cent to 15 per cent.

The customs duty on gold has been revised upwards periodically in the past two years.

“The industry is going through a big stress. It is moving towards a wrong direction,” Federation of Indian Chambers of Commerce and Industry Chairman Gems and Jewellery Committee Mehul Choksi said.

India imported gold jewellery worth US$5.04 billion in 2012 and 2013 and jewellery imports amounted to US$112 million during April to June 2013.

Frequent changes in policies by the regulators has made the industry uncompetitive, he said at the India International Bullion Summit here today.

“If you see a single reason why the Rupee has depreciated it is because of the non-availability of gold loans for the domestic market and move towards cash purchase. In the last two months no gold is arriving officially,” he said, adding that such a move was also dampening the position of jewellers.

The importance of gold in India is such that even with such curbing measures, it would come into the country anyway, he said.

“The government’s effort is again working on the reverse. You are importing it cash. The cash goes out instead of credit and because you increase the duty people are going to bring it through other channels. People are going to deposit money in other channels,” he explained.

Hence, the government should look at other ways of addressing the issue of the current account and fiscal deficit.
Among others, he said regulators should address the issue of curbing through importing agencies.

“If the regulator wants only certain amount of gold to be imported then they can mobilise it with importing agencies. They will plan it accordingly,” said Choksi.

The general perception is that gold imports is a bane to the fiscal deficit, but there has been other imports that has put a pressure on it for instance a jump in the import of capital goods, said Managing Director and Head of the Bullion Business of the Bank of Nova Scotia, India, Rajan Venkatesh.

He pointed out that the import of capital goods saw a 79 per cent jump to US$587 billion from US$10 billion in 2004.

India’s current account deficit hit US$88.2 billion in the 2012/13 financial year. The government has reiterated that it would contain it at US$70 billion in 2013/14 and the fiscal deficit at 4.8 per cent. — Bernama

Source : theborneopost.com