Cracking down on non-essential goods to rein in the ballooning current account deficit (CAD) that has made the rupee weaken by 15% since May, the government on Tuesday raised customs duties on gold, silver and platinum to 10% to squeeze imports of the precious metals.
Customs duty on gold and platinum were hitherto pegged at 8% and silver at 6%. More such import duty hikes of items considered non-essential are expected in the coming days after finance minister P Chidambaram on Monday announced measures to curtail the current account deficit to 3.7% of the GDP in 2013-14 from 4.8% in the precious year.
India, the world's biggest gold consumer, imported 845 tonnes of gold worth nearly 246,000 crore in 2012/13 hurting the foreign exchange availability that has an adverse knock-on effect on essential goods like diesel.
The government also raised the duty on gold ore, concentrates gold dore bars and silver dore bars that are alloys of semi-pure gold and silver.
The additional customs duty on these were raised to 8% from 6% on gold dore/ore and to 7% from 3% in the case of silver dore bars.
Excise duties for domestically produced gold was raised to 9% from 7% and for silver to 8% from 4%.
“Hike in import duties could generate added revenue to the government but may not reduce consumption and therefore the problem of high CAD which is a foreign exchange imbalance, is unlikely to be solved,” Ashok Minawala, board member of the All India Gems and Jewellery Trade Federation.