LONDON (Reuters) - The government does not currently plan additional taxes or curbs on imports of gold as it waits to see the impact of recent tax hikes, a top finance ministry official told Reuters on Wednesday.
India, the world’s largest importer of gold along with China, last week raised the import tax on refined gold by 2 percentage points to 6 percent and more than doubled duties on gold alloy, aiming to rein in a ballooning trade deficit.
Finance Minister Palaniappan Chidambaram was quoted by the Financial Times as saying this week that India was looking at “some other” steps to curb gold imports.
Asked if more tax hikes or import curbs are planned, Arvind Mayaram, economic affairs secretary at the finance ministry, said: “I don’t think there is any plan as of now.”
He added, “We are taking several measures. The Reserve Bank of India continuously reviews different scenarios, but there is no specific product that I can tell you about today. We are continuously working on different products.”
The tax increases come on top of last year’s move to double the gold import duty to 4 percent, but many analysts say the latest steps still will not significantly dent Indians’ passion for gold.
The gold imports are a headache for the government, helping to push the current account deficit to a record high 5.4 percent of gross domestic product in the July-September quarter.
The government wants to link the gold ETF (exchange traded fund) schemes offered by mutual funds to the gold deposit schemes offered by banks to increase the availability of physical gold in the market.
The ETFs are estimated to hold some 40 tonnes of gold, which at present is lying in vaults, Mayaram said.
“We are saying ETFs should monetise part of their gold deposits ... even if you look at 20 percent that is 8 tonnes of gold ... that gold will come to the market without imports to meet domestic demand for gold.”
Mayaram said it was too early to gauge the impact of the recent measures.
“Last year imports were $55 billion, and this year the projected estimate was $50 billion and that was before the (most recent hike),” he said. “So raising the tax (last year) from 2 percent to 4 percent already seems to have had an impact. So I believe there will be further impact this year.”
Reporting by Sujata Rao; editing by Jane Baird