On March 17, the government of India once again doubled the import duty on various types of gold and silver and also proposed to introduce a 2-percent import duty on colored polished gemstones. The innovations of the federal budget for 2012-2013 caused a lively response and protests from the jewelry industry.
"Next (fiscal) year, we don't expect export growth to be more than 5-7% as opposed to 10%-15% this year," said Rajiv Jain, chairman of Gem and Jewelry Export Promotion Council of India, in an interview to the Wall Street Journal.
Prithviraj Kothari, President of the Bombay Bullion Association, said that the new import duties will significantly reduce the demand for gold and that gold imports will increase, but through illegal channels.
Jewelry demand in India has already started to decline this year, followed by an increase in world gold prices, according to CNBC.
Kothari also said that the higher duty would bring about higher prices for locally made jewelry and would hurt jewelry exports of Indian firms like Rajesh Exports, Titan Industries and Gitanjali Gems contributing a significant amount of revenue to the national budget.
Local retailers will be forced to raise prices due to higher prime costs forced up by taxes which in turn will reduce domestic demand for Indian jewelry goods.
Dasha Platonova, Editor in Chief of the Asian Bureau, Rough&Polished
