Low import duty on gold benefits everyone: Smuggling will decrease, customers’ purchases will increase; Jewelers’ competition will decrease, government income will increase


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  • A quarter of gold was wrongly traded in FY19-20
  • Jewelery firms’ revenues plummeted 32% in first half

The import duty in the budget will be reduced from 12.5% ​​to 7.5%, reducing the illicit trade and smuggling of gold. Indian Ratings and Research (Ind-Ra) has said in its report, ‘This will increase the income of the government. The reduction in import duty will increase the demand for gold in the long run, as it will reduce the price of jewelery and increase the purchase of customers.

A quarter of gold was wrongly traded in FY19-20

The government had increased the import duty of gold from 10% to 12% in the budget presented in July 2019 to increase income. Smuggling of gold is being encouraged in the current import duty regime. According to Ind-Ra’s estimates, 150 to 180 tonnes of gold was wrongly entered the country in FY 2019-20. This is a quarter of the 600 to 700 tonnes of gold from official channels. Ind-Ra believes that the reduction in the import duty of gold will benefit the jewelers in the organized sector.

In the first half 32% Decreased revenue of jewelery firms

Most purchases of gold in the country depend on its price. That is, shopping increases when its price decreases and decreases when the price increases. In the first half of FY 2021, the sharp rise in the price of gold had reduced the earnings of top organized jewelery firms by an average of 32%. Ind-Ra had projected their earnings to grow in the second half due to festive purchases.

Demand was up by 10% drop from August peak

The demand for gold was increased in the third quarter due to festival purchases, the depressed demand for gold, and the fall in prices by 10% from the peak of August 2020. Due to the increase in demand, buyers have also benefited from a better trend due to increasing possibility of getting Kovid-19 vaccine.

Due to decrease in import duty 120 Rs. Per gram decreased Price

Gold imports fell to a decade low in 2020 but increased in the fourth quarter. In the third quarter of the financial year 2020-21, when its price was more than Rs 5000 per gram, then most jewelers sales increased. With the announcement made in the budget, the price fell by Rs 120 per gram, effectively reducing the import duty by about two and a half percent.

Gold Price 15-20 in 2020-21% Will be high

Despite the recent fall in gold prices, it remains at a high level in FY 2020-21. According to Ind-Ra, the price of gold in 2020-21 will be 15-20% higher than the previous year and a small part of the inventory gain will be a temporary fall in the price.

Organized jewelery sector gets relief from low import duty

According to the report, the reduction in import duty has brought relief to the jewelers in the organized sector as they will get the competition from the illegal gold trade. Ind-Ra says that the government has announced in the budget to make Sebi the regulator of the gold bullion exchange, it will move towards making the sector organized.

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