The Indian government could cut the import duty on gold by 2-4 percentage points later this month from its current level of 10 percent, sources told FastMarkets.
With the country’s trade deficit easing due to falling oil prices and cheaper gold, there has been widespread speculation about a possible cut following November’s removal of the 80:20 rule.
India’s trade deficit shrank to a 10-month low in December when tumbling oil prices and weak gold demand provided some respite. At $9.43 billion, the deficit was at its lowest since February 2014, down 44 percent on November’s figure and down from $10.2 billion in December 2013.
New Delhi could announce the cut – to eight percent or even to six percent, sources claimed – in its annual budget, which is due on February 28.
Commerce and Industry Minister Nirmala Sitharaman hinted in January that the jewellery sector could benefit from incentives in February’s budget, sparking speculation that the duty could be scrapped altogether.
“I don’t think that they will surprise markets in the same way they did with the removal of 80:20 – I think this time it will be a much more measured and prepared approach,” one source said.
In December, total imports of gold fell to around 40 tonnes from 148 tonnes in October and 152 tonnes in November as the Indian wedding season wound down and demand following the Hindu festival season also began to fade.
Lower import duties would help to deter smuggling, the source added.
India raised the import duty in September 2013 to a record 10 percent – the third such increase in eight months – to tackle the country’s ballooning current account deficit.
Narendra Modi opted to maintain the 10-percent duty and, initially, the 80:20 rule when he became prime minister in May 2014
(Editing by Mark Shaw)
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