The decision aimed at trimming rising Current Account Deficit (CAD), may lead to gold prices rising by about Rs 700 per 10 grams in the short term, experts said.
In addition to raising the duty, the government has also decided to link Gold ETF (Exchange Traded Funds) with Gold Deposit Schemes, with a view to increasing supply of physical gold in the market.
“Government has decided to increase import duty on gold and platinum from 4 per cent to 6 per cent with immediate effect,” Department of Economic Affairs Secretary Arvind Mayaram told reporters.
India spent a whopping USD 56.5 billion on gold imports in 2011-12, straining its foreign exchange reserves and upsetting balance of trade.
This was cited as the primary reason along with oil imports for the widening of CAD. CAD is the difference between the inflow and outflow of foreign exchanges.
In the first nine months of current fiscal, gold imports totaled USD 38 billion. .