Indian Union Budget 2021-22: The retail demand on gold and silver likely to see a boost with the government lowering import duties on the precious metals in the Union Budget on Monday. India which has the world’s second-biggest bullion market reduced import duties on gold and silver to 7.5% from 12.5% but imposed a 2.5% cess on the imports in the Budget.
Gold demand had fallen sharply in 2020 by 35% to 446.4 tonnes, the lowest since 1994, due to the pandemic driven lockdown, according to reports of the World Gold Council (WGC).
“The rationalisation of import duty on gold to around 10.75% from 12.5% is a welcome move and timely. Hopefully, this is the first of a series of such cuts to make bullion an asset class that operates mainstream,” said Somasundaram PR, managing director, WGC India.
The Gem & Jewellery Export Promotion Council (GJEPC) said that the budgetary move will make the gem and jewellery exports globally competitive. “High duty on precious metal had made our exports uncompetitive leading to large Indian diaspora/NRI, moving to Dubai, Hong Kong or other centres to buy jewellery which was largely impacting the employment as well as business in India. Along with this, the decrease of import duty on jewellery findings to 10% will help the jewellery manufacturer exporters in a big way,” Colin Shah, chairman, GJEPC told FE.
MP Ahammed, chairman of Malabar Group, said that the development is extremely positive and will go down well for the seasons ahead. “Reduced import duty will benefit all stakeholders in the jewellery supply chain including jewellery manufacturers, traders and consumers as well. The higher import duty was not only indirectly promoting illegal gold transactions but also eroding the government’s revenue. The import duty reduction will make the trade compliant and eliminate trade malpractices,” Ahammed said.
Somasundaram added that revision of the procedure for disposal of seized gold to expedite the process will further prevent illicit trade. “A rationalised duty structure and simplified processes are fundamental to an organized trading market. The rural welfare schemes announced by the government to boost consumer sentiment will set the consumption cycles in motion and help the jewellery retailers as well. Overall, the budget should lead to positive outcomes for the industry,” he added.
“Setting up of a new regulated gold exchange and the announcement that Securities and Exchange Board of India (Sebi), will be notified as the regulator for gold exchanges will surely help marketability and sale of gold,” Colin said.