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

    Escalation of Media Crackdown in Turkey Heightens Concerns

    Critics see 'a new dark age' as arrests of journalists, closures of media outlets by Erdogan government mount

    Russia Boasts of Troop Buildup on Flank, Draws Flak

    Russian military moves counter to efforts to de-escalate tensions, State Department says

    Video Iraqis Primed to March on Mosul, Foreign Minister Says

    Iraqi FM Ibrahim al-Jaafari tells VOA the campaign will meet optimistic expectations, even though US officials remain cautious

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Immigrant Delegate Marvels at Democratic Processi
    X
    Katherine Gypson
    July 27, 2016 6:21 PM
    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video A Life of Fighting Back: Hillary Clinton Shatters Glass Ceiling

    Hillary Clinton made history Thursday, overcoming personal and political setbacks to become the first woman to win the presidential nomination of a major U.S. political party. If she wins in November, she will go from “first lady” to U.S. Senator from New York, to Secretary of State, to “Madam President.” Polls show Clinton is both beloved and despised. White House Correspondent Cindy Saine takes a look at the life of the woman both supporters and detractors agree is a fighter for the ages.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video First Time Delegate’s First Day Frustrations

    With thousands of people filling the streets of Philadelphia, Pennsylvania for the 2016 Democratic National Convention, VOA’s Kane Farabaugh narrowed in on one delegate as she made her first trip to a national party convention. It was a day that was anything but routine for this United States military veteran.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Calm the Waters: US Doubles Down Diplomatic Efforts in ASEAN Meetings

    The United States is redoubling diplomatic efforts and looking to upcoming regional meetings to calm the waters after an international tribunal invalidated the legal basis of Beijing's extensive claims in the South China Sea. VOA State Department correspondent Nike Ching has the story.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.

    Special Report

    Adrift The Invisible African Diaspora