Bangalore: The wedding season has arrived in India. People are busy planning and designing jewelries. But unlike the other years, this is not going to bring good news to the gold lovers and the bullion industry.
Not only the common people but even the government also has a strong reason to watch out for gold.
Gold has been the promising medium for the Indian Government in counterbalancing its financial crisis. Reports say that Reserve Bank of India sent 47 tonnes of gold as a loan to the European countries in 1991.
This year also, the Government is targeting gold as the rescuer. The previous tax on this yellow metal has been increased to 6 percent. There will be a hike of 2 percent in the rates of gold and platinum. To limit the higher rate of gold import and also to meet up the financial breakdown, the Government has taken this decision.
This decision of the Government has given rise to issues like the smuggling of this metal.
When asked by Reuters, Mr. Arvind Mayaram (Economic Affairs Secretary) said, “It is difficult to establish the impact (of the tax) on CAD (current account deficit) and by how much it will come down, but there will be some moderation in gold demand,”.
Gold smuggling has always been a headache for the customs. The number of conflicts among the customs and the gold smugglers has also increased tremendously in the last three years and the amount of seized gold has reached 900 kg.
India’s neighbors like Sri Lanka, Singapore, Malaysia and other Southeast Asian countries has been the favourite rout for the smugglers.
With the newer rate, the consumers have to pay 60 more on per gram of gold. This can result in the downfall of the gold import by 25 percent and the increase in the smuggling of gold.
With the newer rate and the age old addiction towards gold, the question remains: what will the customer prefer to go? Will they welcome the newer tax rate or the amount of smuggling will rise?