₹10,463 crore in 81 days, and India's gold imports rose anyway
India raised the gold import duty from 6% to 15% on 13 May. Imports rose 34% in May and 5.5% to $6.13 billion across June and July. The duty is now reported under review.
By The Metals Desk
What changed
India raised its import duty on gold from 6% to 15% on 13 May, and the stated purpose was to protect dollar reserves by slowing the inbound flow.
What it means
- The interesting number is not ₹10,463 crore, it is the 5.51%. A duty designed to suppress imports was followed by two full months of higher imports, which means the policy raised revenue and changed behaviour less than intended, and the reported review reads as the government having noticed.
- The figure to watch is not the rate but the gap between recorded imports and Indian demand, because that difference is where the smuggling argument either shows up in the data or does not.
Key figures
| duty collected, 13 May to 2 August | ₹10,463cr |
|---|---|
| the rate, since 13 May | 15% |
| April imports, the month before | +82% |
| June and July, on $5.81B | $6.13B |
Source: India's gold import duty since 13 May
Eighty-one days, ₹129 crore a day, and no fall in imports
Between that date and 2 August, a span of 81 days, the measure collected ₹10,463 crore in customs duty, which is about ₹129 crore a day on this desk's arithmetic. What it did not do is reduce imports.
Inbound shipments rose by nearly 34% in May, in a month the duty covered for only part of, and gold imports across June and July were $6.13 billion against $5.81 billion in the same two months a year earlier, a rise of 5.51% on this desk's recomputation of the two figures.
What the duty did, month by month
Source: India's gold import duty since 13 May
April front-ran it. June and July did not
The trade had front-run it. Gold imports in April, the month before the hike, were up nearly 82% year on year, which is the shape of a market buying ahead of a duty it expects.
What is harder to explain is the two months after, when the higher rate was fully in force and the flow still grew.
India buys 700 to 800 tonnes of gold in a normal year and exports finished jewellery to the UAE, Thailand and Singapore, so the demand underneath is structural rather than opportunistic, and a nine-point duty appears to have repriced it without redirecting it.
| Figure | |
|---|---|
| April, Before The Hike | +82% y/y |
| May, Hike On The 13Th | +34% y/y |
| June-July, Fully In Force | +5.51% y/y |
| Duty Collected, 81 Days | ₹10,463cr |
| Months Imports Actually Fell | 0 |
Growth slowed sharply and never turned negative in any published month Bars are year-on-year import growth, scaled to April. Carat Capital graphics desk.
A review reported on unnamed sources, and labelled as such
That is the argument now being made back to the government.
Reports on 26 August, carried by Outlook Business and by the Free Press Journal crediting Moneycontrol, say officials are examining whether duties on gold and silver should be cut, on the concern that the higher rate has widened the gap between legally imported metal and metal arriving through unofficial channels and has pushed demand into the parallel market rather than out of it.
Industry groups are asking for a return to 6%. Duties on silver and platinum are described as under the same review.
This paper is labelling the confidence rather than assuming it. The review is reported on unnamed government sources, no notification has been issued, no official is quoted by name, and the Ministry of Finance did not respond to a request for comment.
Several outlets carrying the story trace to the same original reporting, and a story syndicated widely is not a story corroborated independently. The Bureau flagged it as speculative and recommended against promoting it, and this desk agrees with that call.
What is not speculative is everything in the first two paragraphs, which is official duty collection and official trade data.
The story so far
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Method
Growth slowed sharply and never turned negative in any published month