India's Gold Import Duty "About to Be Cut" from 10%

Gold imports and impact on Rupee will be "closely monitored" after initial cut to 10% duty rate, claim sources...

 

GOLD IMPORT duty in India is set to be reduced, according to sources in the new BJP government, but there's no word yet on the more important 80:20 rule.

 

Predicting a series of small reductions to India's 10% gold import duty, "The forex situation will be monitored closely after the [first] cut," says a source quoted by DNA, "before any further decision is taken."

 

India's former Congress-led government imposed a series of anti-import rules from 2012, culminating in the 10% duty, import credit ban, gold coins embargo and the 80:20 rule – which requires importers to re-export one fifth of a shipment before booking the next – in mid-2013.

 

Those moves – taken in a bid to rescue the Rupee currency from all-time lows on the forex market, widely attributed to India's huge current account deficit with the rest of the world – effectively closed India to legal gold imports last summer.

 

Officially, the current account deficit has now shrunk to 1.7% of GDP versus 4.7% in the prior fiscal year. But smuggling via India's so-called "grey market" has meantime reached some 250 tonnes, according to market-development group the World Council Council. Reducing the effects of smuggling and "hawala" corruption was a key plank of BJP leader Narendra Modi's election platform.

 

From the record-high 10% imposed last summer, "We are examining the possibility of a cut" in the import duty on gold bullion "in the range of 2% to 4%," DNA quotes its anonymous source inside the finance ministry of Arun Jaitley.

 

"There are very good possibilities that the import duty may be reduced in the next 15-20 days," reckons Mohit Kamboj, president of the Indian Bullion and Jewellers Association, "even before the [new BJP government's] budget is presented."

 

Any reduction in gold import duty, plus a rise in the Rupee, "is expected to bring down gold prices considerably in the next two months," Kamboj again said today.

 

What specialist site Mineweb calls an "uneasy situation" since the IBJA president's previous comments on falling gold bullion prices – forecast to drop 20% by the autumn's peak Diwali festival – is being blamed by some traders for a sharp fall in immediate wholesale demand.

 

Retail customers have begun returning to major outlets however, the Economic Times says, quoting the vice-president of retail sales and marketing at the giant Tata group's flagship Tanishq brand.

 

"There's no doubt been an increase in terms of kilo gold sales over the past few days," says Sandeep Kulhalli.

 

Wholesale premiums in India peaked at $160 per ounce and more above London quotes late in 2013. With no domestic mine output, and reliant on imports to meet net demand, India's dealers have now seen that retreat below $30 per ounce.