The Union Government of India on 17 September 2013 hiked the import duty on gold from 10 percent to 15 percent. The hike is aimed at protecting the domestic industry.
The import duty on Silver was also increased from 10 percent to 15 percent.
Before the hike in import duty, Reserve Bank of India (RBI) took several steps to limit the imports to meet genuine domestic demands for jewellery and export purposes.
Gold jewellery imported during 2012-13 stood at 5.04 billion US Dollar. In the April-June quarter of the current financial year 2012-13, it was 112 million US Dollar. Value of the gold imports decreased to 650 million US Dollar in August 2013 in comparison to 2.2 billion US Dollar in July 2013.
The government hiked the import duty on gold August 2013 for the third time in 2013 as a part of the measures to contain the widening current account deficit. The duty on silver and platinum were also increased to 10 per cent in August 2013.Earlier the import duty on gold was hiked from 4 percent to 6 percent in January 2013.
India is the largest importer of gold in the world, which is mainly utilised to meet demand from the jewellery industry.
Import of gold is mainly responsible for the rise in Current Account Deficit (CAD) and impacts the foreign exchange reserves of the country as well as the value of rupee. Current Account Deficit (CAD) touched a high of 4.8 per cent of GDP in the 2012-13.
What is Current Account Deficit?
Current Account Deficit occurs when a country's total imports of goods, services and transfers are greater than the country's total export of goods, services and transfers.