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India Drops 80:20 Gold Bullion Import Rule
In a surprise move, the Indian government has eased import restrictions on gold, removing the nation’s 80:20 rule.
Introduced last year, the mandate required bullion importers to set aside at least one-fifth of the gold brought into the country so that it can be used for future export purposes.
The government targeted gold imports in an effort to bring the nation’s current account deficit under control.
Despite rumours that import restrictions would be lifted in the months ahead, the removal of the 80:20 rule still came as a shock to analysts, many of whom believed existing measures would remain in place until next year.
Tackling the deficit
Gold remains one of India’s most important import areas, with the commodity commonly bought and sold ahead of special events such as weddings and festivals.
However, the country produces very little of the yellow metal domestically, meaning demand for overseas gold is often high.
As such, the value of the nation’s imports typically exceeds the net worth of exported goods and services, leading to a significant current account deficit.
The 80:20 rule was just one of the measures implemented to reduce the deficit. Others included raising gold import taxes from 2 per cent to 10 per cent, as well as restricting the number of organisations allowed to bring the commodity into the country.
GJF welcomes announcement
The All India Gems and Jewellery Federation (GJF) lauded the government’s decision to abolish the 80:20 rule, expressing its gratitude to Prime Minister Shri Narendra Modi and officials at the Reserve Bank of India.
“We urge the government to initiate the process of creating a comprehensive gold policy and we shall support it wholeheartedly,” GJF Chairman Haresh Soni told the Times of India.
“We are hopeful that gold supply will be better now and lakhs of craftsmen will be able to get jobs. However, we urge the government to curb smuggling from neighbouring countries by reducing gold import duties.”
Gold smuggling in India
Illegal trade has become a problem in India, with criminals attempting to bypass taxes by sneaking gold across the border or through customs undetected.
Manish Jain, vice-chairman of the GJF, said the government should reduce import duties from 10 per cent to 5 per cent in the near future, with a view to lowering it to 2 per cent over the long term.
He argued that the hiked tax rate has created a parallel economy, where gold smuggling has surpassed 200 tonnes.
“Bringing down [duties] would eliminate smuggling and also the deployment of any black money for this process,” Mr Jain stated.
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