The World Gold Council (WGC) on Thursday said that customs duty on gold that was raised on Wednesday will not only leave the yellow metal more expensive but will also lead to gold being sourced through unauthorised channels.
The government hiked customs duty on gold to 8 per cent from 6 per cent earlier hoping that it will curb gold imports which apart from oil is the only the other commodity leading to increased Current Account Deficit or CAD.
“The hike in customs duty on gold from 6 per cent to 8 per cent... Is yet another step to limit supply of gold by making it more expensive. Almost all of India’s gold demand is met through imports and this hike will increase the cost of gold for retail customers,” WGC India managing director Somasundaram said in a statement.
This is the second hike in the duty in six months. In May, gold imports touched 162 tonnes. In terms of value, gold imports in April and May touched a staggering $15 billion.
According to WGC data, India imported 860 tonnes of gold in 2012 calendar year. During January-March of 2013, the country imported 215 tonnes of precious metal.
Somasundaram acknowledged that large CAD is unsustainable and needs to be checked but said that there were number of factors which influence the current account deficit in India and gold is one of them.