You are here
India raises gold import tax but it's unlikely to deter buyers
By Arup Roychoudhury and Siddesh Mayenkar
Reuters
Tuesday, January 22, 2013
http://in.reuters.com/article/2013/01/21/gold-india-import-duty-idINDEE9...
NEW DELHI -- The government has raised the import tax on gold by 2 percentage points to 6 percent to curb purchases and rein in a ballooning fiscal deficit but industry officials expect only a moderate drop in demand.
India's passion for gold, seen by many as a hedge against persistently high inflation, has led to a rise in its current account deficit, which reached an all-time high of 5.4 percent of gross domestic product in the July-September quarter.
Alarmed by the mounting current account deficit, driven by largescale gold imports, the government raised the import duty on gold and platinum to 6 percent from 4 percent.
... Dispatch continues below ...
Opinion Around the World Is Changing
in Favor of Gold -- Find Out Why
When Deutschebank calls gold "good money" and paper "bad money". ...
http://www.gata.org/node/11765
When the president of the German central bank, the Bundesbank, pays tribute to gold as "a timeless classic". ...
http://www.forbes.com/sites/ralphbenko/2012/09/24/signs-of-the-gold-stan...
When a leading member of the policy committee of the People's Bank of China calls the gold standard "an excellent monetary system". ...
http://www.forbes.com/sites/ralphbenko/2012/10/01/signs-of-the-gold-stan...
When a CNN reporter writes in The China Post that the "gold commission" plank in the 2012 Republican platform will "reverberate around the world". ...
http://www.thegoldstandardnow.org/key-blogs/1563-china-post-the-gop-gold...
When the Subcommittee on Domestic Monetary Policy of the U.S. House of Representatives twice called on economist, historian, and gold standard advocate Lewis E. Lehrman to testify. ...
World opinion is changing in favor of gold.
How can you learn why and what it will mean to you?
Read the newly updated and expanded edition of Lehrman's book, "The True Gold Standard."
Financial journalist James Grant says of "The True Gold Standard": "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman she has finally found him."
To buy a copy of "The True Gold Standard," please visit:
http://www.thegoldstandardnow.com/publications/the-true-gold-standard
"It is difficult to establish the impact (of the tax) on CAD (current account deficit) and by how much it will come down, but there will be some moderation in gold demand," Economic Affairs Secretary Arvind Mayaram, told reporters.
The tax would be reviewed if imports moderate, Mayaram said.
The widening current account deficit has increased India's need for foreign capital inflows and evoked memories of the 1991 balance of payments crisis, when the Reserve Bank of India (RBI) sent 47 tonnes of gold to Europe as collateral for a loan to avert a sovereign default.
India has been struggling with a trade deficit that has put the country's current account balance under pressure. To revive exports, the government last month extended an interest subsidy scheme for some exporters.
The duty hike and government's appeal to consumers to cut purchases might not help, largely due to the penchant for gold in India, the world's biggest importer.
India vies with China as top global consumer of gold, and with nearly all demand covered by imports, the country's purchases are a major factor in global prices.
Demand has declined only modestly so far following a 13 percent rise in domestic gold prices last year and some higher taxes.
As the government started talking about curbing imports, industry players said the sheer charm of gold and demand buoyed by heady inflation and meagre savings would blunt the impact of any rise in duties.
"The government's revenue will increase, but imports won't diminish," said Mohit Kamboj, president of the Bombay Bullion Association.
Fundamental reasons for buying gold -- to hedge against inflation and currency risks -- remain as strong as ever, said Amresh Acharya, director, investments at the World Gold council, a trade body funded by miners.
But a jewellery association, which had lobbied against any increase in the import duty, said imports could fall 25 percent.
Gold on the Multi Commodity Exchange ended up 0.6 percent at 30,774 rupees after rising as much as 0.9 percent to 30,847 rupees per 10 grams after the announcement.
But industry analysts fear the increase in the import tax could spur smuggling across porous borders. Illegal trade was rampant before restrictions on gold shipments were lifted in 1990.
"There has been a lot more talk this time around that this will stimulate more smuggling," said David Jollie, analyst at Mitsui Precious Metals in London.
The global market had factored in the increase in the duty, said Afshin Nabavi, senior vice-president at MKS Finance in Geneva.
Finance Minister P. Chidambaram had hinted at an increase in tax on January 2, triggering a massive jump in imports, which traders estimate at about 40-50 tonnes in the first week of the month. Premiums charged on London prices rose to the highest level in two months to $2-3 an ounce.
* * *
Join GATA here:
Vancouver Resource Investment Conference
Sunday-Monday, January 21, 2013
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...
* * *
Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:
http://www.goldrush21.com/order.html
Or by purchasing a colorful GATA T-shirt:
Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:
http://gata.org/node/wallstreetjournal
Help keep GATA going
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
To contribute to GATA, please visit:
Fred Goldstein and Tim Murphy open All Pro Gold
Longtime GATA supporters Fred Goldstein and Tim Murphy have brought their many years of experience in the precious metals and numismatic coins to All Pro Gold as metals brokers who specialize in the delivery of gold and silver bullion bars and coins as well as numismatic gold and silver coins. Fred and Tim follow these markets closely and are assisted by a team of consultants in monitoring market trends. All Pro Gold offers GATA supporters competitive pricing on all bullion products and welcomes inquiries. Tim can be reached at 602-299-2585 and Tim@allprogold.com, Fred at 602-799-8378 and Fred@allprogold.com. Ask about their ratio strategy and the relationship of generic $20 dollar gold pieces to 1-ounce gold bullion coins. Visit their Internet site at http://www.allprogold.com/.
