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Below is the Views On Budget reaction on increased custom duty on Gold by Mr. Chirag Mehta, Sr. Fund Manager-Alternative Investments, Quantum Mutual Fund
Customs duty has become a major revenue-earner for the country and the dream of making India the gold-trading capital has been sacrificed for the sole purpose of filling the government coffers in a bid to reduce the deficit. Further increase in customs duty will only distort markets further as the current differential between the Indian gold prices and International gold price will widen by 2.5% to 15.5% in total. This is a significant differential and may augur well for illicit gold imports and further distort gold markets significantly. Such interventionist policy making ensures that India will never be at the center of the global gold markets despite been the largest consumer and will continue to remain a price taker. Such distortions make it difficult to channelize the hoard of India’s gold savings into circulation and thereby integrate the gold market with other financial markets.
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