Two days after the Prime Minister’s appeal to postpone buying of gold for a year, the Finance Ministry late on Wednesday raised the import duty on gold and silver to 15 per cent. This is an effort to curb imports and ease pressure on the country’s foreign exchange reserves.
According to a notification, there will be a 10 per cent basic customs duty and a 5 per cent Agriculture Infrastructure and Development Cess (AIDC) on gold and silver imports, taking the effective duty to 15 per cent.
PM had urged citizens to avoid gold purchases
Prime Minister Narendra Modi on Sunday urged people to avoid gold purchases for a year to help protect foreign exchange reserves. India meets almost all of its gold consumption through imports.
Gold demand in India, especially for investment, has risen amid a recent rally in prices. Equities have given negative returns over the past year. Inflows into India’s gold exchange-traded funds (ETFs) surged 186% year-on-year in the March quarter to a record 20 metric tons, the World Gold Council said last month.
Government steps up efforts to curb imports
The government has been trying to curb gold imports in recent weeks and began levying a 3 per cent integrated goods and services tax (IGST) on gold and silver imports, prompting banks to halt imports for more than a month. As a result, April imports fell to a near 30-year low. Banks have since resumed imports after paying the 3% IGST, but imports are now likely to fall again following the increase in import duties.