The government today announced an immediate increase in the import duty on precious metals like gold and platinum to 6 per cent from 4 per cent, in a bid to check rising import of precious metals into the country.
This is the second time the government is raising import duties on gold in over the past 11 months. Import duty on gold had been raised from 2 per cent to 4 per cent in March last year.
The move comes at a time when the country's already high current account deficit is further widening each month with steady inflows of high value commodities such as oil and precious metals.
Current account deficit, which represents the gap between imports and exports in terms of value, widened to a record $22.3 billion, or 5.4 per cent of the country's gross domestic product (GDP), in the July-September quarter.
"The government has decided to increase import duty on gold and platinum from 4 per cent to 6 per cent with immediate effect," Arvind Mayaram, secretary, department of economic affairs, said today.
He said the government might review the duties if there is a moderation in gold imports.
The government, Mayaram further said, will also link gold exchange traded fund (ETF) with gold deposit scheme so as to release physical gold at least in part.
"The objective is to unfreeze or release a part of the gold physically held by mutual funds under gold ETFs and enable them to deposit the gold with banks under the gold deposit scheme,'' Mayaram said.
"The advantage will be that a part of the gold lying in stock will be brought into circulation and will partially meet the requirements of the gems and jewellery trade. It is hoped that, consequently, there will be a moderation in the quantity of gold that is imported into the country, he further added.
India imported gold worth $56.5 billion in the 2011-12 financial year and has imported $38 billion worth of gold so far this fiscal.
Although gold importers stayed away from new deals, the news sent gold futures higher by a per cent.
With a sudden spurt in gold imports in January, finance minister P Chidambaram had hinted that the government was contemplating measures to check such sudden price spikes.
Analysts expect the international price of gold to hit $1,800 from the current $1,650 per troy ounce.
This, however, is lower than the $1,920 per ounce hit in 2011.