A reduction in gold import duty alongside other new policy announcements could bode well for India’s gold industry in 2021 and beyond, according to a market update released recently by the World Gold Council (WGC).
The Indian government earlier this month announced key trade policies stipulated in the 2021-22 Union Budget, including lower gold import taxes, the Securities and Exchange Board of India’s (SEBI) designation as regulator for domestic gold spot exchanges; and the establishment of welfare schemes for rural areas aimed at boosting income.
Import taxes on gold and silver now stand at 7.5 per cent from 12.5 per cent while duties on platinum and palladium were cut to 10 per cent, Indian Finance Minister Nirmala Sitharaman announced on February 1.
“The lower import duty will likely enhance consumer demand and discourage unofficial imports,” WGC remarked. “Oversight by SEBI may spur infrastructure development and likely lead to higher trading and more effective gold price discovery. And the rural welfare schemes may indirectly support gold demand through income growth.”
The Department of Consumer Affairs’ announcement that hallmarking will be mandatory for 14-, 18- and 22-karat jewellery will in turn protect consumers from “underkarating,” the council explained. This policy is expected to come into effect from June 1, 2021.
“We believe India’s gold market will not only benefit from these reforms but will also indirectly benefit from the various rural welfare schemes announced in the budget,” WGC said. “With a revival in the economy and these positive budget announcements, Indian gold demand looks set to recover in 2021 from its 2020 lows.”