Govt hikes import duty on gold, platinum to 6 per cent

The government today increased the import duty on gold and platinum to 6 per cent from 4 per cent with immediate effect.

The move is aimed at curbing imports of the precious metals to check the widening current account deficit.

Current account deficit, which represents the difference between exports and imports after considering cash remittances and payment, widened to a record high of 5.4 per cent of the gross dometic product (GDP), or $22.3 billion, in the July-September quarter.

"The government has decided to increase import duty on gold and platinum from 4 per cent to 6 per cent with immediate effect," Department of Economic Affairs Secretary Arvind Mayaram told reporters.

The duties will be reviewed if there is a moderation in gold imports, Mr. Mayaram said.

The news sent gold futures higher by a percent.

Mr. Mayaram further said the government will link Gold Exchange Traded Fund (ETF) with gold deposit scheme. "The objective is to unfreeze or release a part of the gold physically held by mutual funds under Gold ETFs and enable them to deposit the gold with banks under the Gold Deposit Scheme, Mr. Mayaram said.

"The advantage will be that a part of the gold lying in stock will be brought into circulation and will partially meet the requirements of the gems and jewellery trade. It is hoped that, consequently, there will be a moderation in the quantity of gold that is imported into the country, he further added.

Gold imports in 2011-12 amounted to $56.5 billion and in the current financial year, till December, they are estimated at $38 billion.

Finance Minister P Chidambaram had earlier said he was considering reining in imports of gold, used as an investment tool by Indians but which mean a drain on foreign currency reserves.

The government had doubled the import duty on gold to 4 per cent in March last year.

Recently, the Reserve Bank of India executive Director Deepak Mohanty urged investors to shift from physical gold as a hedge against rising prices to financial products like inflation-linked bonds.

With inputs from agencies