News / Asia

India Raises Gold Import Tax to Moderate Demand

A salesgirl shows a gold necklace to customers at a jewelery showroom in the northern Indian city of Chandigarh, November 11, 2012.
A salesgirl shows a gold necklace to customers at a jewelery showroom in the northern Indian city of Chandigarh, November 11, 2012.
Anjana Pasricha
India has raised taxes on gold imports to dampen the country’s huge appetite for the yellow metal. The country’s massive imports of gold - the highest in the world - are straining India’s finances.    

Adjustments

Shobha Dhir will marginally cut back on the gold jewelry she plans to make for her daughter’s wedding later this year. Prices of the precious metal jumped by 13 percent last year, and a recent hike in taxes on imported gold will make the earrings, bangles and necklaces she plans to buy even more expensive.

Dhir says she will have to make some adjustments in the quantity of gold she buys, but has no option for gifting jewelry to her daughter.   

The government has raised import taxes on gold three times in the last year, to curb gold purchases in a country where the yellow metal has long been a customary gift at weddings and festivals.

The latest increase in taxes from 4 to 6 percent came earlier this week and was accompanied with an appeal by the country’s finance minister, P. Chidambaram, to people to moderate their demand for gold. He said the country cannot afford the hefty imports.

Domestic demand

India produces virtually no gold and imports about 700 tons every year to feed massive domestic demand. The bill: $56 billion in the last fiscal year, or 11 percent of the country’s total imports.

A professor at the National Institute of Public Finance and Policy, N. Bhanumurthy, says this massive import bill is contributing to a trade deficit. He says gold also is seen as an unproductive investment.  “More than half of the current account deficit has been contributed by the imports of gold in the recent period. The savings should be channelized for some investment activity. Gold is neither investment nor financial savings,” he explained.

The record high prices - about $540 per 10 grams -- have prompted people to buy less gold jewelry, says Bubbly Sethi, who runs a jewelry business in New Delhi.   “Everything is reduced. If they were giving six bangles, they are giving one bangle. If they were giving big sets [gold neck and ear pieces], they are giving less, that is the difference which is coming,” Sethi explained. 

But jewelers point out that reduced demand from individuals has little impact on overall business. That is because the number of marriages is on the rise in a country where two-thirds of the billion-plus population are under 30.

It is not just urban areas that are driving demand. Rising prosperity in rural areas is resulting in more purchases in villages where banking facilities are often limited and where gold is considered a safe asset. That is a huge market in a country where two-thirds of the population live in rural areas.  
   
Indians are estimated to have about 20,000 tons of gold locked away in jewelry, bars and coins.

You May Like

Video 2nd American Reportedly Killed in Syria

Minnesota television report says Abdirahman Muhumed left area to fight for Islamic State militants More

WHO Fears Ebola Outbreak Could Infect 20,000 People

World Health Organization says outbreak 'continues to accelerate' but that most cases are concentrated in a few local areas More

Angelina Jolie Marries Brad Pitt

Actors wed in small private ceremony Saturday in France More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Chinese Doctors Use 3-D Spinal Implanti
X
August 27, 2014 4:53 PM
A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video Chinese Doctors Use 3-D Spinal Implant

A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video Uneasy Calm Settles Over Israel, Gaza Strip

Israel and the Gaza Strip have been calm since a cease-fire set in Tuesday evening, ending seven weeks of hostilities. Hamas, which controls Gaza, declared victory. Israelis were more wart. VOA’s Scott Bobb reports from Jerusalem.
Video

Video India’s Leprosy Battle Stymied by Continuing Stigma

Medical advancements in the treatment of leprosy have greatly diminished its impact around the world, largely eliminating the disease from most countries. India made great strides in combating leprosy, but still accounts for a majority of the world’s new cases each year, and the number of newly infected Indians is rising - more than 130,000 recorded last year. Doctors there say the problem has more to do with society than science. VOA News reports from Kolkata.
Video

Video Northern California Quake: No Way to Know When Next One Will Hit

A magnitude 6.0 earthquake rocked northern California’s Napa Valley on Sunday. Roads twisted and water mains burst. It was the wine country’s most severe quake in 15 years, and while hospitals treated many people, no one was killed. Arash Arabasadi has more from Washington on what the future may hold for those residents living on a fault line.
Video

Video Scientists Unlock Mystery of Bird Flocks

How can flocks of birds, schools of fish or herds of antelope suddenly change direction -- all the individuals adjusting their movement in concert, at seemingly the same time? British researchers now have some insights into this behavior, which has puzzled scientists for a long time. VOA's George Putic has more.
Video

Video Ukraine: Captured Troops Proof of Russian Role in Separatist Fight

Ukrainian officials say they have captured Russian soldiers on Ukrainian territory -- the latest accusation of Moscow's involvement in the conflict in eastern Ukraine. VOA's Gabe Joselow reports from the Ukrainian side of the battle, where soldiers are convinced of Russia's role.
Video

Video Rubber May Soon Come From Dandelions

Synthetic rubber has been around for more than a century, but quality tires for cars, trucks and aircraft still need up to 40 percent or more natural rubber content. As the source of natural rubber, the rubber tree, is prone to disease and can be affected by bad weather. So scientists are looking for replacements. And as VOA’s George Putic reports, they may have found one in a ubiquitous weed.
Video

Video Jewish Life in Argentina Reflected in Yiddish Tango

Jewish people from across Europe and Russia have been immigrating to Argentina for hundreds of years. They brought with them dance music that were eventually mixed with Argentine tango. The result is Yiddish tango -- a fusion of melodies and cultural experiences that is still evolving today. Elizabeth Lee reports from the Skirball Cultural Center in Los Angeles, where one band is bringing Yiddish tango to an American audience.

AppleAndroid