“Government’s intention is to ensure that gold imports are reduced,” said Rajesh Mehta, chairman of Rajesh Exports Ltd. “Once the festival season starts there could be a shortage in the market. With this duty increase more imports from the legitimate channels will get into the illegitimate channel.”
Imports surged 87% to 383 tons in the four months through July from 205 tons during the same time a year earlier, Revenue Secretary Sumit Bose said today. Silver shipments jumped three fold to 127.9 billion rupees between April and July from 42.8 billion rupees a year earlier, the ministry said.
Consumption in India, which imports almost all the bullion it needs, accounted for 20% of global demand in 2012, according to data from the gold council. Bullion imports were 845 tons in the 12 months ended March 31, while silver shipments totaled 1,963 tons, according to the Ministry of Finance.
“The combination of limited imports, as local participants sort through the various regulation changes this year, higher taxes and rupee weakness make gold considerably more expensive, which would in turn hurt demand,” Joni Teves, an analyst at UBS AG in London, said in an e-mailed statement. The tax increase will further raise the incentive for unofficial flows and the government may need to start cracking down, she said.
The current-account deficit, the broadest measure of trade, tracking goods, services and investment income, widened to $87.8 billion, or 4.8% of the gross domestic product, in the year ended March 31 from $78.2 billion in 2011-2012, according to official data.
India may generate about $11 billion of inflows and keep the current-account gap at $70 billion, or 3.7% of gross domestic product, in the current fiscal year, Chidambaram said yesterday. The increase in taxes on bullion and other commodities may help garner 48.3 billion rupees, Bose said.
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