The latest data shows that gold worth $14.9 billion were imported in November 2024 compared to $3.5 billion a year ago in November 2023, making it the second largest in India’s import basket with a share of 21 per cent just after petroleum. The gain from non-oil exports were just wiped out in gold imports spending. Precious foreign currencies are being spent on gold recklessly.

Import of India reached all-time high in value almost $70 billion in November. The record merchandise trade deficit sharply widened to $37.84 billion from $27.14 billion in October last month, and from $21.31 in November 2023. Officials of the Union Ministry of Commerce have attributed the surge in gold imports to a steep rise in global prices and its safe haven status at a time when shock market remains volatile. Lower customs duty on gold tremendously contributed to the import of gold.

Import duty on gold was slashed in the Union Budget 2024-25 to 6 per cent from 15 per cent since July 1, 2022. It was a record low since June 2013 when it was 8 per cent. It was increased to 10 per cent on August 13, 2013; to 12.88 per cent on July 6, 2019; slashed to 10.75 per cent in February 2, 2021; and increased to 15 per cent on July 1, 2022.

Let us have a look at rate of rupee per dollar during the last one decade under Prime Minister Narendra Modi. It was Rs 54.78 per dollar in 2013, but fell to Rs 72.15 in 2019, Rs 75.45 in 2021, Rs 81.62 in 2022, and Rs 84.93 in the morning trade on December 17, 2024.

While reducing import duty on gold it was said by the government that it would reduce the prices of gold and would become more affordable to common people, which could boost the domestic demand and exports. However, it did not happen, despite an initial drop in gold prices by about 9 per cent from an all-time high of Rs 74,000 per 10 gram to Rs68,000. Within weeks gold prices started rising again and today it is selling at Rs 77,600 per 10 gram. Gold prices in 2010 in India was Rs 18,000 per 10 gram in 2010, which rose to Rs 31,391 in 2018; Rs 39,108 in 2019; Rs 50,151 in 2020; Rs 52,670 in 2022; and Rs 63,820 in 2023.

In the Union Budget 2024-25, the total customs duty on gold was lowered from 15% to 6% and that on gold doré has been reduced to 5.35% from 14.35%.It was sharpest reduction on record. In addition to slashing the import duty, the government has also reduced the holding period for long-term capital gains on gold from 36 months to 24 months. The rate of long-term gains has also been reduced from 20 per cent with indexation to 12.5 per cent.

The definition of “Specified Mutual Funds” was amended to exclude gold ETFs and gold mutual funds. In the 2023-24 Union Budget, gold ETFs and gold mutual funds were considered as “Specified Mutual Funds” and gains were taxed as short-term capital gains at the applicable slab-rate, regardless of the holding period. Moreover, the specified period for long term capital gains was reduced from 36 months to 12 months for listed securities and to 24 months for unlisted securities. If held for over 12 months and are listed, tax for gold ETFs/mutual funds were reduced to a lower rate of 12.5 per cent. Unlisted gold mutual funds were also to be considered as long-term investment if held for more than 24 months and to be taxed at the lower rate of 12.5%. The Union Budget states that the amendment is to be brought into effect from 1 April 2026.

The current gold policy also encourages shopping for gold abroad. However, there are limits of duty-free gold purchases from abroad. Male travellers can carry 20 grams of duty free gold from overseas. Customs duty on gold between 20 to 50 grams is 3 per cent, from 50 to 100 gram 6 per cent, and from above 100 grams 10 per cent.

For female travellers, duty free gold limit is 40 grams. Quantity between 40 to 100 gram is charged 3 per cent customs duty, between 100 to 200 grams 6 per cent and for above 200 grams 10 per cent. For children under 15 years, the rule is the same as for female.

No customs charges apply on less than 20 grams of gold bars for passengers. Customs charges for gold bars between 20 to 100 grams is 3 per cent, for 1 kg of gold bar it is 10 per cent. On a 100 gram gold coin the customs charges are 10 per cent, and for 20 to 100 grams gold coins it is 10 per cent. No charges are applicable on less than 10 grams of gold coin.

In gold purchases in India, 3 per cent GST, import duties, and customs duties apply making the purchase costlier, influencing consumer behaviour and investment decisions. The rich are therefore importing very large quantity of gold making rupee more vulnerable and widening the trade deficit. It seems they have no concern for the common people of India. Such an unbridled import of gold is dangerous for the economy. (IPA Service)