The Union Government of India on 5 June 2013 hiked the import duty on gold from 6 percent to 8 percent. The hike is aimed towards curbing the import of gold. 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.
The import duty on platinum was also increased from 6 percent to 8 percent, following the Customs notification. 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.
The excise duty on gold ore was also raised from 5 percent to 7 percent through another notification issued by Central Board of Excise and Customs.
This is the second hike on the duty of gold imports in six months and the decision of government came up after witnessing the alarming 162 tonnes import of gold in May 2013. In April and May 2013, import touched new figures of 15 billion US dollars.
The CAD touched a historic high of 6.7 percent of GDP in the quarter ending December 2012. CAD is a difference between inflow and outflow of foreign currency.
Earlier the import duty on gold was hiked from 4 percent to 6 percent in January 2013.