Gold Import Duty Hiked Amid West Asia Crisis and CAD Concerns

Context: Gold Import Duty
The Centre doubled the effective import duty on gold and silver imports from ~9.2% to ~18.4% amid West Asia tensions, rising crude oil prices, and concerns over India’s Current Account Deficit (CAD).

Duty Changes

  • Basic Customs Duty (BCD): 5% → 10%
  • Agriculture Infrastructure and Development Cess (AIDC): 1% → 5%
  • Integrated Goods and Services Tax (IGST): 3% unchanged
  • Effective import tax: ~9.2% → ~18.4%

Why Duty Increased?

  • Reduce Current Account Deficit (CAD)
  • Protect foreign exchange reserves and rupee
  • Discourage non-essential imports
  • Rising crude oil prices may increase import bill

Current Account Deficit (CAD)

  • CAD occurs when a country’s imports exceed exports of goods, services, and transfers.
  • Higher gold and crude oil imports widen CAD.

Government’s Priority Imports

Foreign exchange resources to be used for:

  • Crude oil
  • Fertilisers
  • Defence needs
  • Critical technologies
  • Capital goods

Concerns

  • May increase gold smuggling
  • Jewellery sector employment may be affected
  • Gold demand in India is culturally driven
PYQ -2011, Ans – D
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