Gold imports by India in March were 50 metric tons, double that of February, and hit a ten-month high. The recent government decision to allow five private banks to import gold brought the number of licensed importers 14. The central bank said the move was made in order to double imports, which is apparently has done.
20% of all gold imported under India’s quota system must be turned into jewelry and re-exported as value-added commodities. Until that is done, the importer is not allowed to bring more gold into the country. In addition, there is a 10% import tax imposes on gold bars and coins, and 15% for gold jewelry.
This was implemented to curb the billions of dollars annually of gold imports by Indians, which was wrecking the nation’s trade deficit and currency value. India, which has no gold deposits to speak of, has traditionally been the world’s largest importer, consuming approximately one-third of global gold production every year.
Gold smuggling has exploded, with hundreds of tons of bullion estimated to have successfully made it into the country. In the meantime, tens of thousands of Indians in the jewelry sector have lost their jobs, everyone from artisan jewelers to salespeople.
The Indian government has pledged further easing of gold restrictions soon, to alleviate the impact on working Indians. National elections are next month, and the ruling party is polling at all-time lows over the economy. Opposition candidates have promised to loosen import restrictions on gold as well.