Duty Hike Fears in Indian Gold Bullion Industry

KEY members of India's gold industry have expressed concern that the government may again raise the duty levied on imports of Gold Bullion, news agency Bloomberg reports.

"The government may look at increasing the duty to 7.5%," reckons Prithviraj Kothari, president of the Bombay Bullion Association.

"Any such move will hit demand in a big way."

"Any increase in duty will play havoc on the industry," agrees Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation.

"The industry is grappling with high Gold Prices and demand is slow."

Back in March, India's government raised the duty on Gold Bullion imports to 4%, the second hike in as many months, while also applying a sales tax on gold. The announcement was followed by a three-week strike by Indian gold jewelers, and the sales tax was later withdrawn.

India's Gold Bullion imports are often cited as a key cause of the country's balance of payments difficulties.

"The basic fear is that gold will again become a very good investment option and physical demand may rise, putting pressure on the trade deficit," explains Madan Sabnavis, chief economist at Credit Analysis and Research Ltd in Mumbai. 

"We need to take action since we don't have any system of restricting the quantity of gold that can be imported."

The Rupee has lost more than 20% of its value against the US Dollar over the last 12 months. Rupee prices to buy Gold Bullion meantime set new record highs this week.

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