Indian Gold Imports Under Pressure From Duties, Taxes and Government Intervention

Last year we released a survey of India and Gold that covered supply and demand in that country and India’s historical affinity for gold. Indians love gold but their government hates that they love it.

India’s War on Gold

Indian gold imports are significant. They would be higher but for the Indian government’s anti gold policy. Indeed, as a resut of the Indian government actions outlined below, Indian gold imports fell 16% in March 2016.

Indian gold imports were over 900 tons in 2015 but are expected to decline in 2016.

January 2016 Indian gold imports were strong, but February and March imports are reported to have been much lower.

Import Duties

Despite increased demand, Indian gold imports have been hampered by government action. India has placed import duties on gold in order to slow the amount of gold coming into the country. The government’s stated reason for curbing gold imports is that it throws off their balance of trade with imports exceeding exports due to large gold imports.

India has no significant gold mines, so the country’s entire gold demand has to be met either from gold already in the country or by imports. Efforts to get India’s gold mining industry going have met with lots of red tape and very little production. An Australian Indian venture was recently announced that aims to restart an old gold mine that might provide India with a few tons of domestic supply.

Gold Monetization Scheme

The government hopes not only to stop gold from coming into India, but to get Indians to turn their gold in to the goverment in exchange for interest bearing bonds. The scheme launched in late 2015 so far has yielded little gold from Indian citizens. A couple of temples in India have, however, agreed to turn some of their gold in for the interest bearing bonds. For more on India’s gold monetization scheme click here.

Sales Tax

Earlier this year the Indian government imposed a sales tax on gold that immediately prompted jewelers across the country to go on strike. As of mid April, half of India’s jewerly stores are still closed.

Additional Duty on Indians Returning From Abroad

In April 2016, the Indian government imposed an additional 15% duty on gold and silver for Indians returning home after one year abroad.

India’s Foreign Reserves

India’s foreign reserves have grown in recent years and reached an all time high of nearly $360 billion as of April 2016, or about the size of Russia’s foreign reserves.

India’s Gold Reserves

As of April 1, 2016, India’s gold holdings were 5.5% of its total foreign exchange reserves, down from 9.2% in September 2011. The percentage decrease is due in part to the increase in India’s overall reserves, the decline in the price of gold and because India has not added any gold to its reserves in recent years. India holds 557 tons of gold as reserves. Russia, in contrast, with overall foreign reserves about the same size as India’s, holds nearly three times that amount.

According to the World Gold Council, India holds the tenth most gold of any nation.

The Indian gold import charts are derived from data pulled from the Indian Ministry of Commerce and Industry, Govt. of India by Nick Laird of Sharelynx and are updated monthly and archived on Smaulgld.com.

Click to see an overview of India and Silver and a 2016 update

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