INDIA doubled its duty on Gold Bullion imports for the second time in as many months today.
"I propose to increase basic customs duty on standard Gold Bars; Gold Coins of purity exceeding 99.5% and platinum from 2% to 4% and on non-standard gold from 5% to 10%," Indian finance minister Pranab Mukherjee said in his Budget speech.
The advantage to Indian gold refiners will be maintained, with the duty on gold ore rising from 1% to 2%.
The increase in Gold Bullion import duties "will reduce demand for gold significantly" says Prithviraj Kothari, president of the Bombay Bullion Association. Kothari predicts India's gold demand could fall 30% this year, the Wall Street Journal reports.
"There are large chances that smuggling or illegal importing of gold will happen," adds Mehul Choksi, chairman of Gitanjali Gems in Mumbai.
India, which has very little domestic gold production from which to meet demand, imported 969 tonnes of Gold Bullion in 2011, according to data published by the World Gold Council.
"One of the primary drivers of the current account deficit has been the growth of almost 50% in imports of gold and other precious metals in the first three quarters of this year. I have been advised to strengthen the steps already taken to check this trend for better results."
Last month, India's top policy advisors recommended that the government discourage gold imports to India.