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

How to Safeguard Your Mobile Privacy

As the digital world becomes more mobile, so too do concerns about eroding privacy and increased hacking More

'Desert Dancer' Chronicles Iranian Underground Dance Troupe

Film by Richard Raymond is based on true story of Afshin Ghaffarian and his friends More

Obesity Poses Complex Problem

Professor warns of obesity’s worldwide health impact More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam Wari
X
Katherine Gypson
May 25, 2015 1:32 AM
For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam War

For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Female American Soldiers: Healing Through Filmmaking

According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.
Video

Video On Film: How Dance Defies Iran's Political Oppression

'Desert Dancer' by filmmaker Richard Raymond is based on the true story of a group of young Iranians, who form an underground dance troupe in the Islamic Republic of Iran. This is the latest in a genre of films that focus on dance as a form of freedom of expression against political oppression and social injustice. VOA’s Penelope Poulou has more.
Video

Video Turkey's Ruling Party Trying to Lure Voters in Opposition Stronghold

Turkey’s AK (Justice and Development) Party is seeking a fourth successive general election victory, with the goal of securing two-thirds of the seats in Parliament to rewrite the constitution and change the country's parliamentary system into a presidential one. To achieve that, the party will need to win seats in opposition strongholds like the western city of Izmir. Dorian Jones reports.
Video

Video Millions Flock to Ethiopia Polls

Millions of Ethiopians cast their votes Sunday in the first national election since the 2012 death of longtime leader Meles Zenawi. Mr. Meles' party, the Ethiopian People's Revolutionary Democratic Front, is almost certain of victory again. VOA's Anita Powell reports from Addis Ababa.
Video

Video Scientists Testing Space Propulsion by Light

Can the sun - the heart of our solar system - power a spacecraft to the edge of our solar system? The answer may come from a just-launched small satellite designed to test the efficiency of solar sail propulsion. Once deployed, its large sail will catch the so-called solar wind and slowly reach what scientists hope to be substantial speed. VOA’s George Putic reports.
Video

Video FIFA Trains Somali Referees

As stability returns to the once lawless nation of Somalia, the world football governing body, FIFA, is helping to rebuild the country’s sport sector by training referees as well as its young footballers. Abdulaziz Billow has more from Mogadishu.
Video

Video With US Child Obesity Rates on the Rise, Program Promotes Health Eating

In its fifth year, FoodCorps puts more than 180 young Americans into 500 schools across the United States, where they focus on teaching students about nutrition, engaging them with hands-on activities, and improving their access to healthy foods whether in the cafeteria or the greater community. Aru Pande has more.
Video

Video Virginia Neighborhood Draws People to Nostalgic Main Street

In the U.S., people used to grow up in small towns with a main street lined by family-owned shops and restaurants. Today, however, many main streets are worn down and empty because shoppers have been lured away by shopping malls. But in the Del Ray neighborhood of Alexandria, Virginia, main street is thriving. VOA’s Deborah Block reports it has a nostalgic feel with its small restaurants and unique stores.

VOA Blogs