India Gold Import Duty: India raises import tax on gold to 12.5% from 7.5%

India has raised its basic import duty on gold to 12.5% from 7.5%, the government said in a notification on Friday, as the world’s second biggest consumer of the precious metal tries to dampen its demand.

India fufills most of its gold demand through imports, which were putting pressure on the rupee which hit a record low earlier this week. The tax hike comes on the back of a widenging current account — the broadest measure of trade. It is now nearly double the level seen in the previous year.

India’s gold purchases had been picking up in the past year after buying slumped during the pandemic and the country had imported the most gold in a decade in 2021, according to the World Gold Council.

Indians consider gold to be auspicious and a store of value, and the country relies entirely on imports to meet demand.

The Centre has been vigilant after the trade deficit hit a record $24.3 billion in May but had ruled out any knee-jerk reaction that could impact the economic recovery underway.

India has in the past imposed restrictions or raised customs tariffs to curtail imports of certain goods. Such curbs could however undermine economic growth that has held firm in the current fiscal year despite multiple headwinds.

India’s current account balance showed a deficit of 1.2% of GDP in FY22 against a surplus of 0.9% in F21 as the trade imbalance widened to $189.5 billion from $102.2 billion a year ago. Fitch Ratings had said earlier this month that CAD could rise to 3.1% of GDP in FY23. The finance ministry had also flagged the issue in its latest monthly report.