The Union Finance Minister Nirmala Sitharaman presented the full – budget 2024 today before the parliament at 11 am. To enhance domestic value addition in gold and precious metal jewellery in the country, the FM proposed to reduce customs duties on gold and silver to 6 per cent and that on platinum to 6.4 per cent.
The reduction in Basic Customs Duty (BCD) on gold and silver can have significant economic and market impacts. Reduction in BCD lowers the cost of imported gold and silver, making these metals cheaper for consumers. Lower prices can boost demand among consumers, especially in a market like India where gold and silver are highly valued for jewellery, investments, and cultural purposes.
A decrease in the cost of gold and silver as raw materials can reduce production costs for jewellers. Jewellers can offer more competitive prices, potentially increasing sales volumes and profitability. Increased demand and sales in the jewellery sector can contribute to overall economic growth.
Lower import duties can enhance the attractiveness of gold and silver as investment options, leading to increased investments in physical bullion, ETFs, and other gold/silver-related financial products. While a reduction in duties might stabilize prices in the short term, increased demand could lead to price volatility in the longer term.
High import duties often lead to illegal smuggling of gold and silver to avoid taxes. Reducing BCD can narrow the price disparity between official and black-market rates. Encouraging imports through legal channels can enhance government revenue through GST and other taxes, even if BCD revenue decreases.
A reduction in Basic Customs Duty on gold and silver can lead to lower consumer prices, enhanced competitiveness of the jewellery industry, economic growth, increased formal investments, reduction in smuggling, and potential shifts in government revenue dynamics. While contributing to a wider current account deficit through increased imports, the overall economic benefits can balance the impact, especially if it leads to higher exports and more formalized transactions.
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