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

Turbulent Transition Imperils Tunisia’s Arab Spring Gains

Critics say new anti-terrorism laws worsen Tunisia's situation while others put faith in country’s vibrant civil organizations, women’s movement More

Burundi’s Political Crisis May Become Humanitarian One

United Nations aid agencies issue warning as deadly violence sends tens of thousands fleeing More

Yemenis Adjust to Life Under Houthi Rule

Locals want warring parties to strike deal to stop bloodletting before deciding how country is governed More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Seoul Sponsors Korean Unification Fairi
X
Brian Padden
May 29, 2015 1:27 PM
With inter-Korean relations deteriorating over the North’s nuclear program, past military provocations and human rights abuses, many Koreans still hold out hope for eventual peaceful re-unification. VOA’s Brian Padden visited a “unification fair” held this week in Seoul, where border communities promoted the benefits of increased cooperation.
Video

Video Seoul Sponsors Korean Unification Fair

With inter-Korean relations deteriorating over the North’s nuclear program, past military provocations and human rights abuses, many Koreans still hold out hope for eventual peaceful re-unification. VOA’s Brian Padden visited a “unification fair” held this week in Seoul, where border communities promoted the benefits of increased cooperation.
Video

Video Purple Door Coffeeshop: Changing Lives One Cup at a Time

For a quarter of his life, Kevin Persons lived on the street. Today, he is working behind the counter of an espresso bar, serving coffee and working to transition off the streets and into a home. Paul Vargas reports for VOA.
Video

Video Modular Robot Getting Closer to Reality

A robot being developed at Carnegie Mellon University has evolved into a multi-legged modular mechanical snake, able to move over rugged surfaces and explore the surroundings. Scientists say such machines could someday help in search and rescue operations. VOA’s George Putic reports.
Video

Video Shanghai Hosts Big Consumer Electronics Show

Electronic gadgets are a huge success in China, judging by the first Asian Consumer Electronics Show, held this week in Shanghai. Over the course of two days, more than 20,000 visitors watched, tested and played with useful and some less-useful electronic devices exhibited by about 200 manufacturers. VOA’s George Putic has more.
Video

Video Forced to Return Home, Afghan Refugees Face Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.

VOA Blogs