NEW DELHI: The government Friday proposed to increase import duty on gold and precious metal to 12.5 per cent, a move which would make the yellow metal and jewellery expensive in the domestic market.
"It is proposed to increase custom duty on gold and other precious metals from 10 per cent to 12.5 per cent," Finance Minister Nirmala Sitharaman said in her Budget speech.
The decision came at a time when the domestic jewellery industry was demanding a cut in the import duty. The commerce ministry, too, had in past recommended for reduction in the duty.
The country's gold imports dipped about 3 per cent in value terms to USD 32.8 billion during 2018-19.
Dip in the imports expected to keep a lid on the current account deficit. Total imports of the precious metal in 2017-18 had stood at USD 33.7 billion as against USD 27.5 billion in 2016-17 and USD 31.8 billion in 2015-16.
In volume terms, India imported 982 tonnes of the yellow metal in the previous financial year. The imports in 2017-18, 2016-17 and 2015-16 were 955 tonne, 778 tonne and 968 tonne, respectively.
India is one of the largest gold importers in the world, and the imports mainly take care of demand from the jewellery sector. Gems and jewellery exports declined 5.32 per cent to USD 30.96 billion in 2018-19.
The country's current account deficit (CAD), the difference between outflow and inflow of foreign exchange in the current account, increased to USD 57.2 billion or 2.1 per cent of gross domestic product in 2018-19 as against 1.8 per cent in the previous year.