Mumbai - India, the second-biggest gold consumer, may ease restrictions on bullion imports after Narendra Modi’s Bharatiya Janata Party (BJP) won national elections, according to Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation.
The government would probably cut the 10 percent import tax in July and by the middle of next month ease rules that require importers to supply 20 percent of purchases to jewellers for re-export and sell 80 percent in the local market, Bamalwa said yesterday.
India represented about 25 percent of global demand last year, according to the World Gold Council.
The BJP and its allies secured the biggest election win in 30 years, defeating the Congress party. Modi promised to bolster growth and his victory boosted stocks and the rupee.
While the stronger currency and narrowing current account deficit allowed room to ease the gold curbs, it might not top his agenda, research firm Crisil said.
“It’s not the burning issue right now,” said Dharmakirti Joshi, the chief economist at Crisil, a part of Standard & Poor’s. “It’s one of the items on their to-do list. The currency is strengthening and capital inflows being in a good position, it allows the government to taper it off in a pretty orderly manner. Symbolically they should start doing it.”
A move to ease restrictions would improve supply of gold for local jewellers before the festival season, which begins in August and lasts until October. India raised the import duty three times last year and linked imports to re-exports to curb a record current account deficit and a fall in the rupee.
Bamalwa said the Reserve Bank of India might change the rule obliging importers to supply 20 percent of their bullion to jewellers for re-export and the import taxes would be reduced during the federal Budget in July.
Crisil’s Joshi said a cut in import taxes would start the process of normalising trade in the industry, where smuggling had surged. – Bloomberg