India's gold prices continue to rise following import duty hike
Gold prices in India continued to rise this week as the government increased import duty on the precious metal. The Union Government is attempting to curtail imports to reduce the country’s trade deficit.
Import duty on gold coming into India was raised by the central government from 7.5% to 12.5% from July 1. This was designed to disincentivise gold importers from continuing to increase gold imports, the Economic Times reported.
“There has been a sudden surge in imports of gold,” said the Ministry of Finance in a statement, Asian News International reported. “In the month of May, a total of 107 tonnes of gold was imported and in June also the imports have been significant. The surge in gold imports is putting pressure on the current account deficit.”
Despite the government’s numerous incentives designed to boost domestic manufacturing and reduce imports, India’s total trade deficit increased to $24.29 billion in May 2022. This represents a significant increase from its trade deficit total of $6.53 billion in May 2021, according to government data.
Gold prices are expected to remain high in the Indian jewellery retail market due to factors including inflation, demand ahead of the festive season, and its reputation as a safe-haven investment. Although high gold jewellery prices will put off some shoppers from making purchases, the upcoming autumn wedding and festive seasons will ensure demand.
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