"This (higher duty) is not good. It will reduce demand for gold significantly"
India's gold imports could fall in the immediate due to doubling of import duty.
Customs duty on gold and platinum will rise effective March 17 after Finance Minister Pranab Mukherjee announced the move on Friday as part of measures to cut the deficit in his 2012/13 budget .
Gold demand in India had already started to falter this year because of a rally in global prices. Gold spot prices touched their highest level for this year at the end of February around $1,790 per ounce.
If prices stay at current levels with four percent duty, then we can see up to a 20 percent drop in imports.
The country's jewellery demand last year stood at 567.4 tonnes against investment demand of 366 tonnes, WGC data shows.
Jewellery manufacturers who import pure gold to make into necklaces, rings and bracelets for export will lose their competitive edge because of the higher raw material costs.
India had already hiked the gold import duty by 90 percent in January and the government had not been expected to make another increase in the budget.
"We believe this is a short-term measure that the government has taken to shore up revenues and will not necessarily dampen demand in the long term
Impact of the duty hike could be alleviated by further falls in global prices as India is World's biggest buyer of bullion.
In the international market prices are falling. If they fall by another five to six percent then the price drop will compensate for duty hike.
IS IT SHOW TIME $1480 - $1440 ?
LTP - 1659.95
India's gold imports could fall in the immediate due to doubling of import duty.
Customs duty on gold and platinum will rise effective March 17 after Finance Minister Pranab Mukherjee announced the move on Friday as part of measures to cut the deficit in his 2012/13 budget .
Gold demand in India had already started to falter this year because of a rally in global prices. Gold spot prices touched their highest level for this year at the end of February around $1,790 per ounce.
If prices stay at current levels with four percent duty, then we can see up to a 20 percent drop in imports.
The country's jewellery demand last year stood at 567.4 tonnes against investment demand of 366 tonnes, WGC data shows.
Jewellery manufacturers who import pure gold to make into necklaces, rings and bracelets for export will lose their competitive edge because of the higher raw material costs.
India had already hiked the gold import duty by 90 percent in January and the government had not been expected to make another increase in the budget.
"We believe this is a short-term measure that the government has taken to shore up revenues and will not necessarily dampen demand in the long term
Impact of the duty hike could be alleviated by further falls in global prices as India is World's biggest buyer of bullion.
In the international market prices are falling. If they fall by another five to six percent then the price drop will compensate for duty hike.
IS IT SHOW TIME $1480 - $1440 ?
LTP - 1659.95