Long-term curbs on gold will encourage smuggling: India Inc

Written By Unknown on Rabu, 14 Agustus 2013 | 08.11

India Inc on Tuesday said hiking duty on gold would curb demand in short run but it would encourage smuggling of the precious metal in the long term.

"No doubt, a hike in duty in gold imports would curb demand for gold in the short run. From a long term perspective, it is counterproductive as it would encourage smuggling of the precious metal," CII director-general Chandrajit Banerjee said in a statement.

The government hiked customs duty on gold, silver and platinum to 10 percent in the third revision this year in a bid to curb the surging imports and burgeoning CAD. While the duty on gold and platinum was raised from 8 percent to 10 percent, the levy on silver was hiked by 4 percent.

Banerjee said people should be discouraged from investing in gold and the government should encourage financial savings by households. "A better option to discourage the diversion of financial resources into unproductive assets like gold, in near-to-medium term would be to encourage financial savings by households," he added.

He said that it would be appropriate to launch attractive, innovative and reliable inflation adjusted instruments which would yield 1.5-2 percent higher returns than long term average inflation. "Besides, an action plan for dematerialisation of gold is desirable to reduce its physical imports. Thirdly, government should take steps to keep inflation rate as low as possible as gold is seen as a hedge against inflation," he added.



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