To increase export competitiveness, cut down on smuggling, encourage local manufacturing, and slash input costs, the Indian government has lowered customs taxes on gold, silver, and key minerals. Due to the reduction in the overall import tariff from 15% to 6%, the price of gold and silver per kilogramme has decreased by Rs 2,800 and Rs 1,650, respectively. The new budgetary provisions are projected to cause substantial disruptions in the jewellery sector. Union Finance Minister Nirmala Sitharaman emphasised Modi 3.0’s blueprint to turn India into ‘Viksit Bharat’ by 2047.
Budget boost
- Nirmala Sitharaman, the finance minister, has suggested lowering the basic customs tariff to 6% on gold and silver and 6.4% on platinum.
- This action is anticipated to increase export competitiveness, reduce smuggling, improve value addition, decrease input costs, and promote local manufacturing.
- The tax on gold and silver bars, findings, and coins made of precious metals has been lowered from 15% to 6%. There has been a decrease in the tax on gold and silver ore from 14.35% to 5.35%.
- The levies on iridium, ruthenium, osmium, platinum, palladium, and osmium dropped from 15.4% to 6.4%. Under the current arrangement, imports of gold and silver are subject to a 1% Agriculture Infrastructure & Development Cess (AIDC) and a 5% basic customs tax, bringing the total import duty down to 6%.
- According to experts, this decrease in jewellery customs tax will help MSMEs (micro, medium, and small enterprises) and drive down jewellery costs. On the other hand, this can eventually weaken the rupee and increase the trade imbalance.
Effect on Stock Market
- The government’s move to reduce customs tariffs on gold and silver has caused jewellery stocks in India to surge for a second day in a row. This action is anticipated to lower domestic prices and maybe increase demand.
- At ‚Çπ633.35 per share, Kalyan Jewellers India achieved an all-time high after gaining 15%. Shares of Motisons increased by 7% to ‚Çπ165.75 each.
- PC Jewellery and RBZ Jewellers reached the 5% upper circuit limit. Titan’s stock gained by 2.5 per cent, while Thangamayil Jewellery’s shares increased by 3.5%.
- The Indian jewellery market would be affected by the Union Budget 2024, which Sitharaman is representing, in a mixed but generally positive way. To attain long-term and sustainable success, the market has to effectively traverse possible obstacles and capitalise on possibilities.
Effect on Pricing
- Following the news, the price of gold in India dropped 6% to 68,500 rupees per 10 grams, the lowest level in more than three months.
- The country’s current account deficit and the value of the rupee are being pressured by the increase in gold imports, which reached $45.54 billion in 2023–2024.
- Silver prices are decreasing as a result of manufacturers starting to pass along the Budget tariff reductions to consumers.
- The diamond industry is upbeat because it believes that lower pricing would increase demand. India’s growing gold demand may drive up world prices, which hit a record high earlier this year.
- Additionally, this can lead to an increase in India’s trade imbalance and further strain the already weak currency. The Minister of Finance declared a decrease in manufacturing costs.
- The budget’s new measures are anticipated to fortify the jewellery industry’s fundamentals, foster a more diverse market ecology, and advance the industry’s overall growth.
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Conclusion
To decrease smuggling, promote local production, lower input costs, and increase export competitiveness, the Indian government has lowered customs tariffs on gold, silver, and important minerals. The price of gold and silver per kilogramme has decreased by Rs 2,800 and Rs 1,650, respectively, as a result of the removal of import duties. The budgetary provisions may reinforce the industry’s foundations and promote a more diversified market ecology, but they are also likely to produce disruptions in the jewellery sector.
