India is the second largest consumer of gold in the world. Over the years the imports of gold metal has inclined to a great level irrespective of the gold rates. Gold, in our Indian history is viewed more than an investment material and has its own cultural significance.
The trade ministry of India sees scope to lower the import tax on gold. Previously in 2013, tax has been raised three times to ten percent to keep a tight rein on imports. As of now, the current account deficit has grown to be the world’s second largest consumer of gold metal.
“There is a case for lowering import duty, as it is directly linked to the current-account deficit, which has been improving”, Manoj Dwivedi, joint secretary at the trade ministry, informed the reporters in Mumbai. “It will be one of the strong recommendations on the budgetary side from the ministry.”
Most of the gold used by the nation is imported from other countries. The deficit has continued to stay at convenient level for the finance ministry to reduce the tax rates and support the gold industry, Dwivedi mentioned.
“We have been saying that an ideal rate for the industry is 2 percent,” he said, referring to the import tax on gold. “It can be brought down in a phased manner or in one go.”
Current deficits is an abundant measure of trade. According to the Reserve Bank of India the deficits have tapered down from 1.1 percent in 2015-2016 to 0.7 percent of gross domestic product in 2016-2017. There, record of narrow current deficits have stopped the depreciation on rupees.
According to the valuation from the World Gold Council, local consumption of gold is projected to increase from 650 metric tons to 750 metric tons to almost ranging between 850 metric tons to 950 tons by 2020. Indians who purchase gold during festive seasons, marriages and other special occasions as part of the wardrobe collection and as gifts are drafted with good news as a cut in import tax would in turn reduce the purchase price of the jewelry. It shall also act as an impediment for the smuggling of the precious gold metal.