India Raises Import Tax on Precious Metals

RAPAPORT... India's Gem & Jewellery Export Promotion Council (GJEPC)has expressed disappointment with the nation's latest Union Budget, warningthat the failure to reduce high duties on gold and diamonds will result in furtherjob losses. The council had been lobbying for a reduction in import dutyon polished diamonds in a bid to boost the value of subsequent shipments out ofthe country. It had hoped this move would stem the decline in India's polished exports, which fell 15% year on year in May. However, the proposed cut from 7.5% to 2.5% did notmaterialize in the budget announced on July 5. Instead, the National DemocraticAlliance-led government said it would be increasing import duty on gold andprecious metals from 10% to 12.5% -a move the GJEPC believes will have a negative effect on India's wider jewelry sector. "The gem and jewelry industry is goingthrough very tough times, with a decline in exports and job losses, and theindustry expected some positive announcement as encouragement to our sector,"said GJEPC chairman Pramod Agrawal.Reducing import duty on gold, diamonds and colored gemstones would release "blockedcapital," he said. Doing so would make imports cheaper and free up somemuch-needed liquidity for the trade. However, the government's decision to dothe opposite for gold - while makingno change to duties on processed diamonds and gemstones - would stymie India's jewelry sector, he added. The move will "result in growth ofbusiness in neighboring countries, as the foreign tourists will stop buyingjewelry from India," Agrawal continued. He cautioned that the processing oflarger diamonds was expected to "shift to competing countries such as China andVietnam" as a result. The council will continue to pushfor reductions in the import duty, as the status quo is "encouraging [the] greymarket, hampering export competitiveness, and resulting in job losses." The gem and jewelry industry accounts for an estimated 7% ofIndia's GDP and 15% of its merchandise exports. It also employs 5 millionpeople nationwide. Image: Gold. (Alexander Boden/Flickr)