The Government of India (GoI) has elevated the import duty on gold by 4.25% to earn more on the import of yellow metal and to achieve its target of Reducing the Fiscal Deficit. This change already came into effect on 30 June.
Before this, the primary customs duty on gold was 7.5%, which is 12.5% currently. This decision was necessary because there was a drastic increase in gold imports in May, i.e., 107 tonnes of gold were imported and the imports of gold were continuously increasing in June too. The continuous plunging of the Indian Rupee against the US Dollar was one of the effects seen in the Financial Markets. The Indian Rupee hit its lowest at 79.09/$. But, after increasing the Import duty on gold, The Indian Rupee recovered its position against the US Dollar and closed at 78.94/$.
The Indian Economy was facing too much pressure on the Current Account Deficit (CAD). The current account balance of India showed a deficit of 1.2% of GDP in the 2022 Financial year against a surplus of 0.89% in the 2021 Financial year. Also, The Trade imbalance increased to $189 billion from $102 billion in-between both financial years.
According to The World Gold Council, India imported its highest gold level in 2021 in over a decade. However, the Government of India is ensuring that the decision of increasing import duty on gold won’t impact economic growth.
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