In a move that’s widely seen as an effort to protect domestic markets, the Indian government jacked up import taxes on gold jewelry from 10 to 15 percent. Meanwhile, the import charge on gold bullion remained at 10 percent.
Domestic jewelers in India had complained that imports of cheaper gold jewelry from other Asian nations was harming the domestic gold market. The move is not likely to immediately affect the gold trade but could down the road. The action was aimed at cheaper gold jewelry imported into India from Thailand and Malaysia.
The move by India to increase import taxes on this gold trade was likely the result of Thailand forming a trade group to increase gold jewelry exports into India.
“We are concerned about India’s trade deficit, but we want India to open up gold jewelry imports from Thailand, accompanying with the certificate of origin as per the guidelines set in the free trade agreement between the two countries,” said Adul Chotinisakorn who is the executive director and consul of the Thai Trade Centre. His comment appeared in Business Standard on September 19.
The current free trade agreement between India and Thailand allows Thai gold jewelry to be exported at a concessional duty of one percent as measured against the prevailing rate from other origins.
In February, India had banned the import of gold jewelry from Thai jewelers after an investigation by the Directorate of Revenue Intelligence had determined that bilateral trade rules had been broken.
The Thai government has charged that these actions by India are an effort to control the current account deficit between the two nations.
Bilateral trade between India and Thailand stood at $8.6 billion in 2012. That number is likely to be duplicated in 2013. About four percent of India’s gold trade comes from Thailand. That number is insignificant compared to Dubai gold imports into India. As an aside, nearly all finished diamonds imported into Thailand for the jewelry sector originate from India.
India is the world’s largest importer of gold. In the 2012-2013 fiscal year, India imported $38 billion in gold and gold jewelry. Thailand accounted for $1.52 billion of that total. Imports of gold jewelry into India were tallied at $137.6 million between April and July of 2013.
In a Reuters article, the Indian finance minister stated: “To protect the interests of small artisans, the customs duty on articles of jewelry … is being increased.”
Haresh Soni, who chairs the All India Gems and Jewellery Trade Federation, applauded the move by the Indian government, stating that the action would support the jewelry manufacturing sector. It’s estimated that there are about 400,000 retail jewelers in India. Many are small family operations. The rise in import taxes on gold comes right before the peak buying season arrives for weddings and festivals.