INDIA has more than doubled import duties on gold and silver to 15% from 6%, as New Delhi seeks to defend the rupee and offset the economic strain of the ongoing Iran war and elevated energy costs, said the Financial Times on Wednesday.
The move follows Prime Minister Narendra Modi’s public call for Indians to curb spending on fuel, overseas travel and gold — all of which weigh heavily on the country’s import bill, the newspaper added.
The rupee has shed 5% against the US dollar since the US and Israel began military operations against Iran in late February, with the currency now trading below 95.5 to the dollar despite repeated central bank interventions. Foreign exchange reserves fell by $40bn in the first month of the conflict alone, said the Financial Times.
Surendra Mehta, national secretary of the India Bullion and Jewellers Association, said the duty increase had been widely anticipated following the prime minister’s remarks and would likely reduce domestic gold demand by around 10%. “If they have to stop the falling rupee overnight, this is the only measure,” he said.
India’s gold imports reached $72bn in the year to 31 March, up nearly a quarter on the prior year, while silver imports surged close to 150% to $12bn over the same period. The country’s trade deficit widened to $120bn from $95bn the previous year, driven by costlier energy, fertiliser and bullion imports.
Analysts at Jefferies warned the duty hike would likely push domestic gold prices higher, potentially spurring smuggling.
Goldman Sachs has estimated Indian households hold gold worth approximately $3.8tn, close to 90% of GDP. Gold currently trades at around $4,700 an ounce.