JOIN US The recent hike in import duty on gold from 6 per cent to 8 per cent runs the risk of gold being imported through “unauthorised channels”, an euphemism for smuggling, given the price differentials between domestic and global prices.
The MD of bullion trading company Riddisiddhi Bullions, Prithviraj Kothari, said, “With this duty hike, a difference of 9.24 per cent between the international and domestic price of the yellow metal is evident. It will incentivise a rise in illegal channels and malicious activities with respect to importing gold and related products like jewellery into the country.”
He added: “Every Indian going on a holiday abroad might be tempted to carry some gold back (in prescribed limits as per Government norms), as the tax saving could help paying part of the trip. While 1 kg of gold is not affordable to most of Indians, organized illegal channels could finance porters and collect the gold at their return to the country.”
The World Gold Council (WGC) has also raised the fear of such a trend setting in.
Ïn a statement, WGC India Managing Director Somasundaram PR said, “The hike...is yet another step to limit supply of gold by making it more expensive. The nature of demand at the retail level is such that restricting supply will not be effective in the long run and is likely to lead to non-transparent price premiums in the market and demand being met increasingly through unauthorised channels.”
India imported 864 tonnes of gold in calendar year 2012 calendar year and in the first quarter ended March 2013, the country imported 256 tonnes, according to WGC data. India's gold imports stood at The figure touched 162 tonnes in May.
An analyst hinted at mixed trend due to the duty hike. The AVP & Incharge-Metals, Energy & Currency Research at Religare Securities Sugandha Sachdeva said, “Gold prices are likely to test Rs 28,000 -28,600 per 10 gm in the immediate short term but beyond that, it will take cues from the international prices. Also in medium to long term, prices might inch lower due to its negative impact on demand."