GOLD IMPORTS to India – the world's largest consumer of the precious metal – could fall by one quarter if the government again raises import duty in next month's budget, according to a leading bullion industry figure.

Gold jewelry fabrication in India fell 11% last year, global metals consultancy Thomson Reuters GFMS estimated this week, partly thanks to import duty hikes and partly because of the weakening Indian Rupee, which made buying gold more expensive for Indian households.

"Going by the government's attitude towards gold and the Reserve Bank of India's latest recommendations," said Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Federation lobby group, to Reuters on Thursday, "we fear gold imports will be further curtailed by at least 20-25% compared to last year."

Last year New Delhi quadrupled the effective import duty on Gold Bullion. Debate has since raged over what level of import duty would a return of gold smuggling – prevalent throughout India's 1947-1966 ban on gold imports, as well as the tightly-regulated licensing regime which followed until 1992.

"Demand for gold must be moderated," said finance minister P.Chidambaram in early New Year 2013. "We may be left with no choice but to make it a little more expensive to import gold. The matter is under government consideration."

Gold bullion import duty started 2012 at 1%, but was raised to 4% as the government sought to curb India's demand for gold (it has no domestic mine production) and also privilege the country's own scrap-metal recycling and refining industry.

Bamalwa now believes New Delhi could raise Gold Bullion import duties to 6% in February's annual budget.

"The increase in duty will make gold costlier in India," he says, "and at this price investors will not be interested in gold, keeping in mind that the Indian Rupee is also constantly weakening."

But the worsening of India's trade gap – the key reason given for trying to curb gold imports – has "much less to do with gold imports than [is] widely perceived," counters a story at the Financial Express.

India's current account deficit yawned to a record $22.4 billion – some 5.4% of the country's GDP –during July-Sept. 2012

"In terms of absolute value," notes the report, "gold imports declined to $19.6 billion in the first half of this fiscal year compared with $29 billion in the year-ago period."

As a proportion of India's current account deficit, Financial Express goes on, gold bullion imports have fallen from 185% at the end of fiscal-year 2010-11 to 74% in 2011-12 and then just 47% in the second-quarter of 2012-13.