Indian gold buyers were disappointed by the government’s failure to ease strict anti-gold import legislation in its first post-election budget on Thursday.
Some in the market had hoped the government would lower import duties on bullion from the current 10 percent level and repeal the 80:20 rule, under which 20 percent of gold imported into the country has to be exported again with value added.
But finance minister Arun Jaitley failed to provide much succour to the gold market in his budget statement, which concluded earlier.
“Unfortunately, there was no change to the government’s policy on gold legislation,” All India Gems and Jewellery chairman Haresh Soni told the Bullion Desk. “That is very disappointing as it is a burning issue in the industry right now.”
Analysts had previously said that the newly elected government led by Prime Minister Narendra Modi – who was seen as the favoured candidate by gold importers – would balk at immediately lowering restrictions after higher oil prices in recent weeks put the country’s current account deficit under pressure.
India is a major gold importer – it was the world’s leading consumer before being overtaken by China last year.
Still, New Delhi had made some changes to legislation prior to the budget, with more importers now allowed to bring gold into the country.
Premiums for locally delivered physical gold had declined sharply in recent weeks in anticipation of a further relaxation of the rules – there is a real possibility that rates could increase again.
(Editing by Mark Shaw)