Govt may increase an import duty in coming budget, on precious metals
December, 30th 2010
Indian investors are expecting that the government may increase an import duty on precious metals in February budget and that could keep demand strong before that.
"The many-fold rise in prices (of precious metals) may attract the attention of the decision makers and also act as a rationale for any duty hike for the government," said Daman Prakash, ex-convenor, Tamil Nadu Bullion Forum.
In last budget, the government increased the import duty on gold for the second time to 300 rupees per 10 grams from 200 rupees earlier, and import duty on silver raised to Rs 1,500 per kg from Rs 1,000 earlier.
Gold prices in India have surged 23.7 percent from Rs. 16,772 per 10 grams from the last budget when it was presented. Moreover, Gold prices touched the life time high of Rs. 20,924 per 10 grams in this year due to some Micro economic factors that supported the precious metals prices. Euro Zone debt crisis, strong physical demand in India during the festival and marriage season and weakening of dollar enhanced the investment appeal in the precious metals as a safe haven investment. On Wednesday, gold was trading at Rs.20,741 per 10 grams.
If government hikes import duty, it would lead to increase the delta between the officials gold rates and unofficial gold rates. Gold is one of the regulated sector in India and the federal government has permitted to 23 state-run and private banks to trade in bullion through wholesale and retail market.