So… Was the Gold Duty Hike a Mistake?

General
1

Back in May, the government raised gold and silver import duty from 6% to 15% to discourage imports and reduce pressure on forex reserves.

But now, just a few months later, the government is reportedly discussing a possible duty cut after the higher duty failed to curb demand and the grey market started growing.

India’s relationship with gold is something else , Increase the duty, people find another way to buy it… jugaaduu.

But jokes apart, this is the part I’m trying to understand, wasn’t this scenario discussed before the hike? Industry players had already warned that such a sharp increase could push more business into the grey market.

So why make the hike this aggressive in the first place, only to potentially reverse it a few months later?

2 Likes
2

Not aggressive enough. Needed to be like 25% when I was holding futures :face_exhaling:

3

In india People buy gold jewellery for marriage. Burden will be increase on middle and lower class.

It is easy to say here to raise 25 percent.

Marriage season is coming in 2 months.

4

If Gold were to do a repeat run of the last few years. It’ll automatically make up for any initial pain. Sell cash and buy asset is not a bad idea from common man POV. From Gov’t POV, marriage season coming up? Isn’t that exactly why they should rise the prices?

5

They have to think about every class. Indian marriages can’t happen without gold.

Recently there was a news where a girl got married without any gold jewellery but not everyone gonna do that.

6

The tax may decrease just before next general election. So, I don’t expect any reduction in the near future (for a couple of years).