Duty rise to hit India gold, silver demand - trade

MUMBAI (Reuters) - India's doubling of import duty on gold and silver is likely to encourage recycling of the metals locally in what could continue to keep imports subdued for the rest of this year, traders and analysts said on Monday.

"The full year (2009) imports could be down by 45 to 50 percent," said Nayan Pansare, an independent analyst who works for jewellery exporting companies.

Pansare said recycled gold could increase to 250 tonnes this year against 200 tonnes in normal years as more people could be selling gold at rallies.

"A section of the people believe prices will fall, that is why there has been scrap sales," he said.

Finance Minister Pranab Mukherjee announced in the budget for 2009/10, import duty on gold bars is being raised to 200 rupees ($4.1) per 10 grams from 100 rupees earlier.

The minister said import duty on silver is being raised to 1,000 rupees ($20.7) per kg from 500 rupees earlier.

"As it is business was bad. This will make it worse," Suresh Hundia, president of Bombay Bullion Association reacted.

Domestic demand could drop by up ton 25 percent in the remaining six months of calendar 2009 if prices stayed around current levels, Hundia said.

Gold imports during January to June were about 59.8 tonnes, down 57 from 139 tonnes a year earlier, data from the BBA showed.