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Tuesday, 27 March 2012

PM Defends Hike in duty


Finance Minister Pranab Mukherjee defended the government's decision to double import duty on gold saying that high imports were straining balance of payments and exchange rate of the rupee. India imported gold and silver worth $54.5 bln in Apr-Feb, accounting for 12.6% of total imports “The import of gold of such magnitude strains balance of payments and affects exchange rate of rupee through impacting supply-demand balance of foreign exchange”, said Mr.Mukherjee
 
I agree to the balance of payment issue that the government is facing via high imports of gold. But double duty is not the right solution to this issue. Gold has always been a popular investment destination for all types of investors, standing out as a tried and true safe haven that generally performs well in times of equity market turbulence, uncertainty as well as an alternative to fiat currencies that have occasionally come under pressure. In India, Gold is bought by almost all classes of society and such a duty will affect the imports and in turn the reserves. It will also lead to an increase in various other illegal modes of gold procurement so as to save the extra costs over it.

Indian households have nearly 25,000 to 30,000 tonnes of Gold. I would suggest Government of India to introduce schemes like minimum tax scheme wherein an investor is charged minimum tax to convert his/her unaccounted gold into an accounted one. By this the government treasury will also increase and the idle gold can be put to use. The other scheme can be a VDS scheme (voluntary disclosure scheme) by which the Gold /Silver can be brought to the market.

There are much feasible solutions available rather than imposing such duties

1 comment:

  1. PRECIOUS METAL WRAP: Gold headed for a second weekly rise as minutes from the U.S. Federal Reserve’s last meeting damped expectations for higher borrowing costs, while tension in Ukraine persisted.

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