After the end of a three-week strike by jewelers in India, the largest buyer of gold bullion in the world, gold could resume its upward path in the market. Jewelers were protesting a tax on unbranded gold jewelry instituted by Finance Minister Pranab Mukherjee, who has also boosted import duties on gold bars and coins as well as platinum. Jewelers met with Mukherjee, who agreed to consider their concerns.
Bloomberg reported Friday that the All India Gems & Jewellery Trade Federation met with the finance minister, who has been battling the country’s current-account deficit, partly fueled by record purchases of gold bullion.
Bachhraj Bamalwa, chairman of the trade body, was reported saying after the meeting, “The minister assured that he would consider the demand for the rollback of excise duty favorably.” The nationwide strike lasted for 21 days and, according to Bamalwa, cost the industry about 200 billion rupees ($4 billion) in lost revenue.
Gold bullion is rising for the twelfth year in a row and hit a record high in September. It has lost a bit of ground in recent days but overall has risen 4.5% in 2012, and a boost in imports in India is expected to sustain that trend.
In a report by its central bank on March 30, figures showed that India’s deficit increased from a revised Q3 figure of $18.4 billion to $19.6 billion in Q4. Bloomberg data show that that is the largest quarterly gap since at least 1949. Concerns are that the deficit could put new pressure on the rupee , which fell 16% in 2011.
In his efforts to fight the deficit, Mukherjee had boosted the gold import tax for a second time this year, as well as doubling the import duty to 4% on platinum as well as gold bars and coins. The tax had already been doubled in January. Mukherjee said that refined gold would be subject to a doubling of the excise tax to 3%. He also will double from to 2% the tax on gold ore, concentrate and so-called dore bars for refining.