India Reduces Customs Duty On Gold And Silver To 6% To Stimulate Market

India has reduced import duties on gold and silver from 15% to 6%, a decision that industry experts believe could increase retail demand and reduce smuggling in the world's second-largest bullion market.

Increased gold demand from India might push global prices higher, which have already reached record levels this year. However, this could also widen India's trade deficit and exert pressure on the struggling rupee.

"To enhance domestic value addition in gold and precious metal jewellery, I propose to reduce customs duties of gold and silver to 6%," India Finance Minister Nirmala Sitharaman stated during her budget speech on Tuesday.

On the announcement, John Paul Alukkas, Managing Director, Joyalukkas Group, said: "India is the largest consumer of gold in the world. One of the highlights of the India Union Budget 2024 was that the duty on gold and silver has been reduced to 6%, and platinum duty has been reduced to 6.4%. While some global jewellery retailers are interpreting this as a cause for concern, I believe that Indian customers will continue buying gold in Dubai. Price is not the sole factor driving purchase decisions when it comes to gold jewellery. Dubai remains the leading destination for gold shoppers due to its competitive prices, high quality, and unique designs. Additionally, Indian tourists can enjoy tax-free shopping and access to exclusive collections, which may only be available here.

"Time will tell whether the reduction in import duty directly affects the demand for gold in Dubai. However, at Joyalukkas, we pride ourselves on serving both Indian and Dubai shoppers with exceptional quality and the best value."

Sitharaman also announced an exemption from import duties for 25 critical minerals, including lithium. India is actively seeking ways to secure lithium supplies, a vital component for electric vehicle batteries.

The finance minister further proposed reducing basic customs duty on certain brood stocks, shrimps, and fish feed to 5%. This move aims to support the aquaculture industry by lowering input costs.

Changes in Customs Duties

Conversely, Sitharaman mentioned that the government will increase customs duty on ammonium nitrate to 10% and non-biodegradable plastics to 25%. These changes are part of broader efforts to manage environmental impact and regulate hazardous materials.

E-commerce export hubs will be established under a public-private partnership (PPP) model to help MSMEs (Micro, Small & Medium Enterprises) sell their products internationally. This initiative aims to boost exports by providing better infrastructure and support for small businesses.

Support for Traditional Artisans

Sitharaman highlighted that traditional artisans will have opportunities to sell their products in international markets through these new e-commerce hubs. This measure is expected to provide a significant boost to local craftsmanship and heritage industries.

The finance minister also proposed expanding the list of exempted capital goods used in manufacturing solar cells and panels. This expansion aims to support the renewable energy sector by reducing production costs and encouraging investment in green technologies.

The reduction in import duties on gold and silver is anticipated to stimulate retail demand while curbing illegal imports. At the same time, exemptions for critical minerals like lithium reflect India's strategic focus on securing essential resources for its growing electric vehicle industry.

Congratulating finance minister on the overall budget, Dr Anish Shah, President of Federation of Indian Chambers of Commerce & Industry (FICCI) stated: "FICCI congratulates the Hon’ble Finance Minister for delivering a growth-oriented budget that has delivered both short term demand stimulus and actions focused on medium to long term growth imperatives, while maintaining fiscal discipline. The budget is inclusive, with a strong thrust on quality job creation and skilling. It also strikes a balance between agriculture and manufacturing, with elements of services.

"There is continuity in policy announcements. The focus on simplification and ease of doing business, boost to manufacturing, focus on research and innovation, thrust on public capex, use of technology, support to women, farmers and MSMEs, and promoting sustainability are the key themes that resonate once again in this Union Budget proposals.

"The focus areas of budget are very much in line with the FICCI’s key priorities for the industry and we are happy to note that many of FICCI’s suggestions have been considered in this budget, as seen in the proposals for accelerating agriculture research, enhancing participation of women workforce in manufacturing, factor market reforms for improving manufacturing competitiveness as well as measures to promote green economy."