India Doubles Import Taxes on Bullion to Raise Cash

[Slimprofits]

http://www.bloomberg.com/apps/news?p...d=auq8d2Kodx5w

India, the world’s biggest consumer of bullion, doubled import taxes on gold and silver as the government sought to raise funds to spend on roads and supply food grain to the poor at below market rates.

Purchases of gold bars will attract a duty of 200 rupees ($4.1) per 10 grams, while silver will be charged at 1,000 rupees per kilogram, Finance Minister Pranab Mukherjee said in his budget speech in parliament. Gold imported as jewelry or in any other form will attract a duty of 500 rupees per 10 grams.

The import levy may cool demand for jewelry in the South Asian nation, worsening the 55 percent drop in imports by the country in the first five months of this year.

[big67]

Re: India Doubles Import Taxes on Bullion to Raise Cash

These are very interesting data, thank you. I wonder what effect this heavy taxation will have on bullion demand / prices...

[metalman]

Re: India Doubles Import Taxes on Bullion to Raise Cash

http://www.bloomberg.com/apps/news?p...d=auq8d2Kodx5w

India, the world’s biggest consumer of bullion, doubled import taxes on gold and silver as the government sought to raise funds to spend on roads and supply food grain to the poor at below market rates.

Purchases of gold bars will attract a duty of 200 rupees ($4.1) per 10 grams, while silver will be charged at 1,000 rupees per kilogram, Finance Minister Pranab Mukherjee said in his budget speech in parliament. Gold imported as jewelry or in any other form will attract a duty of 500 rupees per 10 grams.

The import levy may cool demand for jewelry in the South Asian nation, worsening the 55 percent drop in imports by the country in the first five months of this year.

itulip's warned 100 times... gov't may tax gold/silver into oblivion... do not put all your eggs in that basket.

[Munger]

Re: India Doubles Import Taxes on Bullion to Raise Cash

http://www.bloomberg.com/apps/news?p...d=auq8d2Kodx5w

India, the world’s biggest consumer of bullion, doubled import taxes on gold and silver as the government sought to raise funds to spend on roads and supply food grain to the poor at below market rates.

Purchases of gold bars will attract a duty of 200 rupees ($4.1) per 10 grams, while silver will be charged at 1,000 rupees per kilogram, Finance Minister Pranab Mukherjee said in his budget speech in parliament. Gold imported as jewelry or in any other form will attract a duty of 500 rupees per 10 grams.

The import levy may cool demand for jewelry in the South Asian nation, worsening the 55 percent drop in imports by the country in the first five months of this year.

Is this correct? $4.1 per 10 grams gold ~= .05%. Which is much much less than your transaction fees.

[c1ue]

Re: India Doubles Import Taxes on Bullion to Raise Cash

Is this correct? $4.1 per 10 grams gold ~= .05%. Which is much much less than your transaction fees.

I think your math is off.

1 troy oz = ~$930 = ~31 grams

Thus $4.1 tax is more like 1.35% than 0.05%

[WildspitzE]

Re: India Doubles Import Taxes on Bullion to Raise Cash

These are very interesting data, thank you. I wonder what effect this heavy taxation will have on bullion demand / prices...

Investors in gold should always be aware of what's going on in India. India's annual consumption of gold (the largest gold market in the world) is put at 800-850 tonnes (out of 2400, I think). Increases in prices like this, because of taxation, are always detrimental re: demand.

Given that India has been importing less over the last few months according to the gold council, due to the current prices, this may not be material now -- but how will it affect the price floor/supporting demand (the one where the Indian's start buying at)? Should be interesting to monitor.

[Munger]

Re: India Doubles Import Taxes on Bullion to Raise Cash

I think your math is off.

1 troy oz = ~$930 = ~31 grams

Thus $4.1 tax is more like 1.35% than 0.05%

Ah, yep. I was thinking $4.1 per 10 oz. It makes sense now.

[hayekvindicated]

Re: India Doubles Import Taxes on Bullion to Raise Cash

India had very restructive import policies on gold in the 1980s and this led to widespread smuggling - it didn't put an end to gold demand. In fact, a whole genre of organised criminals arose out of the gold smuggling trade back then.

On a slightly different note, India's economy is a disaster waiting to happen. The fiscal deficit is running at around 13 percent of GDP. Its not sustainable and the same scumbags that made India's economy rot for decades are now back in power with close to a majority. India needs fiscal and monetary discipline but isntead it gets fiscal profligacy. There will be a price to pay.

The sheer scale of deficits being run around the world by various governments is massively bullish for gold. Just another currency crisis like the one in the late 90s with Asia and Russia would send gold through the roof. Gold performs very well in an era of massive economic mismanagement and performs poorly when risks are low and economies are managed well, relatively speaking. Deflation is nowhere near as bad for gold as is steady and solid low inflation growth. But deflation is a red herring.

Governments will have to finance their deficits. And its going to get harder and harder. Crank up the printing press boys!

[WildspitzE]

Re: India Doubles Import Taxes on Bullion to Raise Cash

India had very restructive import policies on gold in the 1980s and this led to widespread smuggling - it didn't put an end to gold demand. In fact, a whole genre of organised criminals arose out of the gold smuggling trade back then.

Thanks for the color. Currently reading Shantaram, not sure if you've read it. In it, or where I'm on in the book, he talks about organized crime in India. Currently I'm reading about the currency black market. Very interesting, especially the bit where he talks about how the large companies (in Dubai, etc.) that hire expats enter into black market fx deals with Indian organized crime for rupee remittances (and both sides take a skim). Not sure how true it is, but it certainly sounds like a realistic scenario to me, based on my experience living in the emerging markets.

[hayekvindicated]

Re: India Doubles Import Taxes on Bullion to Raise Cash

Thanks for the color. Currently reading Shantaram, not sure if you've read it. In it, or where I'm on in the book, he talks about organized crime in India. Currently I'm reading about the currency black market. Very interesting, especially the bit where he talks about how the large companies (in Dubai, etc.) that hire expats enter into black market fx deals with Indian organized crime for rupee remittances (and both sides take a skim). Not sure how true it is, but it certainly sounds like a realistic scenario to me, based on my experience living in the emerging markets.

That's called the Hawala trade. Its been around for decades.

[hayekvindicated]

Re: India Doubles Import Taxes on Bullion to Raise Cash

To your point see link.

http://www.bloomberg.com/apps/news?p...d=a0t3yEcu1Ne4

The Chinese have built infrastructure that the Indians can only dream of - and they did it without running deficits. Jim Rogers, who drove through China in his road trip around the world earlier in the decade, commented that China had the world's best highways. Why didn't the Chinese government run deficits of 13 percent a year?

Obviously, the PR bullshit that the Congress scumbags are giving is for the consumption of the markets - we are running these debts because we will build roads, bridges and blah blah blah. In reality, these enormous deficits will line the pockets of the politicians and the bureaucrats (as they always have).

The markets aren't stupid - the SENSEX tanked almost 6 percent within minutes of Mukerjee's speech. At some point, these debts could result in a balance of payments crisis - Argentina style. Come to think of it, much of the world is beginning to look like Argentina. We live in interesting times as the Chinese say.

[Slimprofits]

Re: India Doubles Import Taxes on Bullion to Raise Cash

Jim Rogers' article (or is it a chapter from a book?) on traveling through India:

http://www.lewrockwell.com/rogers-j/rogers-j9.html

[newnewthing]

Re: India Doubles Import Taxes on Bullion to Raise Cash

The LA Times has an article outlining NY's crippled legislative bodies. It's a "See, those guys are even worse than us" story.

Meanwhile so many average people hear the economic news but don't understand nor will they until the consequences ripple down.

It's sad watching empires crumble.

Debt men walking.

[WildspitzE]

Re: India Doubles Import Taxes on Bullion to Raise Cash

The Chinese have built infrastructure that the Indians can only dream of - and they did it without running deficits. Jim Rogers, who drove through China in his road trip around the world earlier in the decade, commented that China had the world's best highways. Why didn't the Chinese government run deficits of 13 percent a year?

Obviously, the PR bullshit that the Congress scumbags are giving is for the consumption of the markets - we are running these debts because we will build roads, bridges and blah blah blah. In reality, these enormous deficits will line the pockets of the politicians and the bureaucrats (as they always have).

The markets aren't stupid - the SENSEX tanked almost 6 percent within minutes of Mukerjee's speech. At some point, these debts could result in a balance of payments crisis - Argentina style. Come to think of it, much of the world is beginning to look like Argentina. We live in interesting times as the Chinese say.

Given how heavily invested indians are in gold, and thus relatively protected form a currency crisis (in relation to how others in other countries would be), it will be interesting too see if the government increases it's pillaging (from just an import duty). Confiscation?

[sishya]

Re: India Doubles Import Taxes on Bullion to Raise Cash

Given how heavily invested indians are in gold, and thus relatively protected form a currency crisis (in relation to how others in other countries would be), it will be interesting too see if the government increases it's pillaging (from just an import duty). Confiscation?

Confiscation is out of Question. Govt is not as powerful as in West. People are more tribalistic. Some Banks are accepting Gold deposits, ie provide interest in Gold. Please see the following.

http://economictimes.indiatimes.com/...18.cms?curpg=1

http://www.financialexpress.com/news...-to-1.5/79806/