Budget 2025: Gold Market Bress for possible duty

The Union Budget of 2024 brought a wave of optimism to the jewelry industry with a historic 9% deduction in import duties on gold, reducing duty from 15% and 14.35% to 5.35% for gold door imports. It marked the decrease in the fastest duty, and for the first time this duty fell below 10%after 2013.

However, as India prepares the budget for 2025 on 1 February, there is a growing speculation that the government may modify these duties. Economists argue that while duty cuts have stimulated high gold consumption, they have not increased domestic value or increased high exports. Instead, the increase in gold consumption has contributed to a wide fiscal deficit, with the rupee 87 against the dollar.

The trade data for November 2024, released on 16 December, revealed a record high in India’s trade deficit, inspired by an increase in gold imports on a large scale. Preliminary estimates showed that gold imports reached $ 14.8 billion, accounting for 21% of total goods imports. Despite the amendment in these numbers, gold imports remain high.

India, the second largest consumer in the world, imports the largest consumer of gold, most of his gold demand. Duty cuts, which made gold more affordable, contributed to this increase in consumption. High imports have increased the country’s trade deficit. In fact, gold imports increased from 104% year-on-year in August due to a decrease in import duty in July 2024. While imports decreased in the next months, they again hit the record high by November.

Gold imports in 2024 (in ton)

month
January	35.7
february	103.5
march	33.7
april	42.5
May	46.3
june	43.1
july	43.6
august	136
September	59.7
october	86
november	117
December (EST)	50

Despite the record imports, the industry has urged the government to maintain less duties, arguing that gold landing costs have declined, making gold smuggling less profitable. In addition, the jewelry sector claims that duty cuts have promoted competition by freeing working capital and improving the overall financial health of the industry.

As the date of budget presentation arrives, jewelry and gold industries hop that the government will keep in mind the importance of importing duties at its existing levels, or harassing the delicate balance of the market.

Read: Budget 2025: India Inc. shows optimistic, FICCI survey about the economic development of the country