Import duty increased on gold
The effect of the government’s decision to increase the import duty on gold is now visible in the market. Experts associated with the jewelery industry believe that due to expensive gold, its demand may decline by 10-15% in the future. On the other hand, people can bring the old gold kept in their homes to the market to sell or exchange it to take advantage of the higher price.
The government has recently increased the effective import duty on gold from 6% to 15%. This includes 10% basic custom duty and 5% agriculture infrastructure and development cess. The aim of the government is to reduce the increasing gold imports and reduce the pressure on the country’s current account deficit.
More than 25,000 tonnes of gold lying in homes
According to experts, about 25,000 tonnes of gold is lying in Indian homes, a large part of which is inactive. If even some part of it comes back into the market then the need for import of new gold may reduce.
Bhima Jewellers’ Chairman B. Govindan said that due to high prices the sale of old gold may increase rapidly. He said that there is a possibility of reduction in sales depending on the quantity of gold.
Fear of increase in smuggling and gold loans
Chairman of India Bullion and Jewelers Association (IBJA) Surendra Mehta said that due to increase in duty, smuggling of gold may increase again. According to him, even earlier when the duty was higher, 100-120 tonnes of gold used to come to India through illegal routes every year. He also said that amid inflation and high gold prices, people may start taking more gold loans against their jewellery.
Imports may decrease due to low carat jewelery
Industry experts believe that if people start buying 14K and 9K jewelery instead of 22 carat, then gold imports can be reduced by 20-30%. At the same time, imports may also decrease due to less investment in gold bars and coins. India imports about 750-800 tonnes of gold every year. In such a situation, the government can increase the use of domestic gold by strengthening the gold monetization scheme.
Trend of exchange of old gold will increase
Varghese Alukkas, Managing Director of Jose Alukkas, says that after the increase in duty, people will want to get cash by selling old jewellery. At present, about 50% of the sales of big jewelery brands are happening through exchange of old gold.
Malabar Group Chairman M.P. Ahmed says that in the coming months, people would prefer to buy new jewelery by exchanging old gold rather than buying new gold directly.
Demand for diamond jewelery may increase
Experts believe that in the era of expensive gold, the demand for diamond and studded jewelery may increase, because the use of gold in these is less. However, the Gem and Jewelery Export Promotion Council (GJEPC) has warned that increasing the import duty does not completely stop gold imports. Due to this, there is a danger of increasing smuggling, increasing export costs and increasing pressure on the jewelery business.
