The decision of the Central Government to increase import duty on gold and silver from six per cent to 15 per cent is expected to impact the bullion market in the coming months. After the announcement, activity in the Sarafa market in the Palampur region of Kangra district has intensified as traders and customers closely monitor future price trends. Under the revised structure, the Central Government has imposed a 10 per cent basic customs duty along with a five per cent Agriculture Infrastructure and Development Cess on the imports of gold and silver. The decision is expected to make the precious metals costlier in the country. Prime Minister Narendra Modi’s recent appeal encouraging citizens to prefer India-made products over imported gold has also generated discussions in the jewellery trade circle.
According to Buddha Mal Jewellers owner Satish Karwal, the immediate impact of the duty hike has been limited so far and the actual market response may become clear by June. In Palampur’s jewellery market, the price of 24-carat gold reportedly touched around Rs 164,650 per 10 grams while 22-carat gold was available for around Rs 153,000 per 10 grams.
Karwal says that the gold prices had risen sharply by around Rs 10,000 in one day recently. However, business activity has remained relatively stable over the past few days and customer footfall has been limited. He believes the impact of the duty hike may remain moderate in the region because most of the jewellery purchases are linked to marriages and family functions. Since the marriage season is about to end, crowds in jewellery markets have already started declining.
Karwal says that the increase in import duty will eventually place an additional burden on customers though the long-term market trend will become clear only after some time. He adds that rising gold prices generally do not significantly affect demand in the region, as purchases are largely associated with marriage ceremonies and traditional family occasions.
He says that the decision of the Central Government seems to be aimed at balancing the falling rupee and controlling pressure on foreign exchange reserves.
