The Indian government has increased import duties on gold and silver to 15 per cent from the earlier 6 per cent, according to official orders issued on Wednesday, per a Hindustan Times report. The move is reportedly aimed at reducing imports of precious metals and easing pressure on the country's foreign exchange reserves at a time of global economic uncertainty.
Under the revised structure, imports of gold and silver will now attract a 10 per cent basic customs duty along with a 5 per cent Agriculture Infrastructure and Development Cess (AIDC). Import duty on platinum has also been increased from 6.4 per cent to 15.4 per cent. Similar changes have been made for gold and silver dore, coins and findings.
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Government focuses on trade deficit and rupee
The decision comes as India looks to manage its widening current account deficit and support the rupee, which has been among Asia's weaker-performing currencies in recent months.
"The policy measure aimed at safeguarding macroeconomic stability, conserving foreign exchange, and moderating non-essential imports during a period of heightened global uncertainty arising from the ongoing West Asia crisis," Hindustan Times quoted a government official as saying, requesting anonymity.
The official added, "The current geopolitical situation has created significant volatility in global crude oil markets and international shipping routes. As a large importer of crude oil, India remains vulnerable to elevated energy prices and supply-side disruptions, which can increase the import bill, exert pressure on inflation, and the current account deficit (CAD).
In such circumstances, prudent management of the country's external sector becomes essential."
Prime Minister Narendra Modi had also urged citizens on Sunday to avoid purchasing gold for a year in an effort to help preserve foreign exchange reserves.
Industry warns of smuggling risks
Industry representatives believe the higher duties may slow demand in the world's second-largest consumer of precious metals. However, concerns have also emerged over the possibility of illegal imports increasing again.
"As expected, the government has raised duties to curb the current account deficit. However, this could affect demand, as gold and silver prices were already elevated," said Surendra Mehta, national secretary at the India Bullion and Jewellers Association, per HT.
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Bullion dealers also warned that higher duties could revive grey market activity. "Grey markets are likely to become active, as the incentives to bring in gold illegally are high. At current price levels, smugglers could make significant profits," said a Mumbai-based bullion dealer at a private bank, per HT.
India had already imposed a 3 per cent IGST on precious metal imports earlier this year, a move that contributed to a sharp decline in April imports.
