Chennai: Industry proposes; government disposes. While the industry was looking forward for a six per cent reduction in gold import duty, the Budget stunned them by increasing it by 2.5 per cent. Gold became costlier by Rs 850 per 10 gm and silver close to Rs 1,000 per kg after the duty hike on Friday.
The bullion market immediately reacted to the import duty hike proposed in the Union budget as gold prices rose to all-time high levels of Rs 35,100 per 10 gm in the Multi Commodity Exchange from Rs 34,200. Apart from the duty hike, rupee appreciation too lifted gold prices by Rs 900. Similarly, silver prices moved up from Rs 37,800 per kg to around Rs 38,900.
“As we are net importers of gold, prices shot up immediately by 2.5 per cent,” said Jateen Trivedi, technical research analyst at Bonanza Portfolio. The bullion industry has been demanding lowering of import duty on gold to 4 per cent from 10 per cent as the current account deficit has lowered to much comfortable levels compared to what it was in 2011 and 2012. The government had increased the import duty from two per cent in January 2011 to 10 per cent by end of 2013 in different stages in order to curb the widening of current account deficit.
“The gold duty hike will be a dampener for gold demand in the immediate short term as the gold prices are already at very high levels. However, if the prices are on an upward trajectory, demand will catch up,” said Himanshu Gupta, vice-president and head of commodities and currencies research, Globe Capital.
However, the industry is more worried about the likely rise in smuggling of gold. The import duty hike will make gold in Indian market costlier than neighbouring market by 15.5 per cent after adding the three per cent GST....