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India's Interim Budget Likely to Cut Gold Import Duty to 5%

The Interim Budget, to be presented in about two weeks time, is likely to announce several measures to soothe the troubled Gems and Jewellery sector in the country. The government had earlier announced formulation of a comprehensive gold policy to cover all aspects of the sector. Sources close to the Finance Ministry say that the budget is most likely to reduce the import duty on gold by 50% from existing level of 10% to 5%. The industry has been demanding import duty cut for a long time now.

The gold import duty was hiked in 2013 to 10%, in order to curb rising imports of the yellow metal into the country. The government had then announced that it is forced to increase the duty on gold, mainly on account of widening current account deficit (CAD) and decline in domestic currency value. As of now, the CAD has come under control, thanks to softening of crude oil prices and lower gold imports.

With CAD under control, the Gems and Jewellery Export Promotion Council (GJEPC) believes that the government is in a position to consider duty reduction. This will help the country double its gold jewellery exports, it noted.

The official industry data signals notable decline in gold imports by the country in 2018. India’s gold imports have dropped to 756 tonnes during the previous year, when compared with 859 tonnes in 2017. The imports registered significant decline in December 2018, falling by nearly one-fourth as compared with the same month in 2017.

As per estimates, the country’s CAD is expected to shrink to 2.3% of the GDP during the current fiscal.