India's gold imports plummeted by 70 per cent to 30 tonnes in May following the government's decision to hike import duty on the precious metal, an official said on Thursday.
Sharp Decline in Gold Imports
The official, who spoke on condition of anonymity, said that the sharp decline in imports came after the government increased the import duty on gold and silver to 15 per cent from 6 per cent, effective May 13.
India, the world's second-biggest gold consumer, imported about 100 tonnes of gold in April, before the duty hike was announced.
Impact of Duty Hike on Gold Trade
Industry experts said that the steep duty hike has made gold imports unviable for many traders, leading to a significant drop in inbound shipments. The higher duty has also pushed up domestic gold prices, dampening demand.
Gold prices in India have risen by about 10 per cent since the duty hike, further curbing consumer interest.
Government's Rationale Behind the Move
The government has justified the duty hike as a measure to curb non-essential imports and reduce the current account deficit. The move is also aimed at discouraging the use of gold as a store of value and promoting financial savings.
However, the gold trade has expressed concerns over the impact on the industry, including job losses and a potential rise in smuggling.
Outlook for Gold Imports
Analysts expect gold imports to remain subdued in the coming months unless the government revises the duty structure. The official said that the government will monitor the situation and take necessary steps if required.
The drop in imports is likely to help narrow India's trade deficit, but it may also lead to a shortage of gold in the domestic market ahead of the wedding season.
