Planning to buy Gold, then you have a reason to be patient as prices may decline in the near future if import duty is reduced.
In the calendar year 2013 - the government was blazing all its guns to bring down the India’s record ($ 87.8 billion) current account deficit. The aim is bring down the CAD to below $ 50 billion by the end of the fiscal year. One of the most important measures implemented during the fire-fighting effort was hiking the import duty on Gold so as to discourage imports and reduce the forex outflows.
The move seems to have been paid off largely off late. And if January trade deficits numbers are to be go by, then the trade deficit is back in single-digits at $ 9.92 billion - thanks to 77 per cent fall in bullion (Gold + Silver) imports.
It may be recalled that the government had hiked in the import duty on Gold from 4 per cent to 10 per cent in a staggered manner during the period of January to August 2013. Following which, Gold imports have shown remarkable decline as per expectations.
According to the World Gold Council report, Gold demand in the September quarter fell by 32 per cent to 148 tonnes against 219 tonnes during the same period a year ago. Jewellery demand dropped by 23 per cent to 105 tonnes (136 tonnes) due to import restrictions. Data for December quarter is awaited.
The Jewellers body has been requesting for lowering the import duty on Gold and also relaxation of the 80:20 scheme, wherein 20 per cent of the imports has to leave India as exports of processed gold.
With elections round the corner - it won’t be surprising to expect a duty cut on Gold imports soon enough. Also, recently the Congress chief Sonia Gandhi had asked for the Commerce ministry to look into the above mentioned Jewellers demands.
The case seems tilted in favour of a likely cut in import duty for Gold. The quantum could be similar to what the hikes were last year - i.e. a 2 per cent duty cut. This could very much translate into at least Rs 500 decline in current prices of Gold. Any further or higher than 2 per cent reduction in Gold duty will trigger a sharper fall in Gold prices. Hence, buyers should be patient for now; the yellow metal may just get somewhat cheaper. To keep a tab on the latest Gold price in India visit Market On Mobile.