India's gold demand has plummeted by nearly 70 per cent following the government's decision to increase import duty on the precious metal from 6 per cent to 15 per cent earlier this month. Industry estimates indicate that demand fell to approximately 7.5 tonnes in the fortnight ending May 27, compared with nearly 25 tonnes during the same period last year, according to the India Bullion & Jewellers Association (IBJA).
Sharp Decline in Purchases
Jewellers across the country have reported a sharp decline in purchases after the duty hike. The effective tax burden on gold has risen to 18.45 per cent, making it significantly more expensive for consumers. Industry leaders noted that higher fuel and food prices linked to the ongoing Iran conflict have further weakened consumer sentiment, reducing discretionary spending on gold.
Additional Factors Affecting Demand
Several other factors have contributed to the slowdown in gold demand. The period of Adhik Maas, considered inauspicious for gold purchases in Hindu tradition, has reduced buying activity. Additionally, reduced investment interest due to higher prices and uncertainty in global markets has dampened demand. The combined effect of these factors has led to a dramatic drop in gold sales across the country.
The IBJA emphasized that the duty hike has had an immediate and severe impact on the gold market, with many jewellers reporting a near halt in new purchases. The association expects demand to remain subdued in the coming months unless the government revises the duty structure or global gold prices adjust significantly.
