Mumbai: India’s demand for gold and silver is likely to be hurt further this year following an increase in import duty in the budget for 2009/10, the head of Bombay Bullion Association (BBA) said on Monday.
“As it is business was bad. This will make it worse,” Suresh Hundia said.
Finance minister Pranab Mukherjee said import duty on gold bars is being raised to Rs200 ($4.1) per 10 grams from Rs100 earlier.
The minister said import duty on silver is being raised to Rs1,000 ($20.7) per kg from Rs500 earlier.
Domestic demand could drop by up ton 25% in the remaining six months of calendar 2009 if prices stay around current levels, Hundia said.
Gold imports during January to June were about 59.8 tonnes, down 57 from 139 tonnes a year earlier, data from the BBA showed.
The metal was trading at Rs14,509 per 10 grams by 1:30pm, up 0.31% from the previous close. It had hit a domestic record high of 16,040 in February as a weaker rupee added to the rise in dollar-denominated world prices.
The head of a local spot exchange said the higher import duty would increase demand for locally recycled gold.
“Since imported gold would now become more costly, it would enhance the viability of business to recycle scrap gold,” said Anjani Sinha, chief executive officer of National Spot Exchange Ltd, which recently launched spot contracts of recycled gold.
However, if gold prices suddenly fall overseas imports will rise, Hundia said.
“If the rally of gold snaps, consumers could come back to it,” he said.