India Doubles Import Taxes on Bullion to Raise Cash

[GRG55]

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?

Of gold? In India? Not a snowball's chance in hell of that ever happening. The last time there was a serious effort a "redistributing wealth" in India it cost the Prime Minister her life...

[hayekvindicated]

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?

The chance of that happening is close to zero. Not because the politicians will not do it (they can do anything) but simply because most Indians hide their wealth anyway - they don't pay taxes (hence the black money economy) and most of the gold they buy is also bought with black money.

Technically, most of the privately held gold in India is capable of confiscation anyway because Indians buy it with money on which they haven't paid taxes - however, theory and practice are entirely different things. The government in India is extremely corrupt and any centralised plans are easily thwarted by the people bribing government officials.

[hayekvindicated]

Re: India Doubles Import Taxes on Bullion to Raise Cash

Of gold? In India? Not a snowball's chance in hell of that ever happening. The last time there was a serious effort a "redistributing wealth" in India it cost the Prime Minister her life...

Indira Gandhi's assassination had nothing whatsoever to do with wealth re-distribution. She was assassinated by Sikh separatists as revenge for "Operation Bluestar". Get your facts straight.

[WildspitzE]

Re: India Doubles Import Taxes on Bullion to Raise Cash

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/

Interesting links, thank you.

[WildspitzE]

Re: India Doubles Import Taxes on Bullion to Raise Cash

The chance of that happening is close to zero. Not because the politicians will not do it (they can do anything) but simply because most Indians hide their wealth anyway - they don't pay taxes (hence the black money economy) and most of the gold they buy is also bought with black money.

Technically, most of the privately held gold in India is capable of confiscation anyway because Indians buy it with money on which they haven't paid taxes - however, theory and practice are entirely different things. The government in India is extremely corrupt and any centralised plans are easily thwarted by the people bribing government officials.

Thanks for the response, this makes sense to me the most. Everything I've been reading about India jives with what you say. Especially, about how mass corruption is used in India, and quite effectively, to mitigate government mandates. In the US, their view on the rule of law made many voluntarily give up their gold. I don't think that such would be the case in India.

[WildspitzE]

Re: India Doubles Import Taxes on Bullion to Raise Cash

Indira Gandhi's assassination had nothing whatsoever to do with wealth re-distribution. She was assassinated by Sikh separatists as revenge for "Operation Bluestar". Get your facts straight.

Despite me just beginning to learn about India's dynamics and history, this is my understanding as well.

[hayekvindicated]

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?

Check out the 30 year gold price history in Indian Rupees.

The bull market in gold barely started in the 1980s for Indians!! The price kept rising all through the mid-80s to the 90s and then rocketed upwards after 2004 (when the Congress Party came to power and drove fiscal deficits through the roof).

What is amazing in all of this is that India has never had a serious currency crisis (it came close in 1991 but got an emergency IMF loan), and, despite this massive currency devaluation, the economy continued to grow and function. I have no idea what the inflation rate in rupees was during this period but I am certain it was way higher than the fake government statistics would show. The gold price chart alone shows that very effectively.

Ergo, Indians know all about currency devaluation. Speaking from personal experience, the people who have been royally screwed through those years are those who keep their money in bank accounts (surprise surprise!!). It is not uncommon for ultra conservative and ultra risk averse middle class salaried Indians to keep money in bank accounts because anything else is considered too "risky". Some members of my own family fall in that category. No wonder they have suffered enormous loss of wealth through the decades. That wealth has been transferred to the "black moneyists" - who don't trust the currency and don't pay taxes.

[sishya]

Re: India Doubles Import Taxes on Bullion to Raise Cash

Check out the 30 year gold price history in Indian Rupees.

The bull market in gold barely started in the 1980s for Indians!! The price kept rising all through the mid-80s to the 90s and then rocketed upwards after 2004 (when the Congress Party came to power and drove fiscal deficits through the roof).

What is amazing in all of this is that India has never had a serious currency crisis (it came close in 1991 but got an emergency IMF loan), and, despite this massive currency devaluation, the economy continued to grow and function. I have no idea what the inflation rate in rupees was during this period but I am certain it was way higher than the fake government statistics would show. The gold price chart alone shows that very effectively.

Ergo, Indians know all about currency devaluation. Speaking from personal experience, the people who have been royally screwed through those years are those who keep their money in bank accounts (surprise surprise!!). It is not uncommon for ultra conservative and ultra risk averse middle class salaried Indians to keep money in bank accounts because anything else is considered too "risky". Some members of my own family fall in that category. No wonder they have suffered enormous loss of wealth through the decades. That wealth has been transferred to the "black moneyists" - who don't trust the currency and don't pay taxes.

I have to disagree here. Most People I know never kept money in the bank. Many pooled their money via relative to buy small parcels of land, buy Gold mostly, but never put in a Bank.. The number of people putting deposit in a bank is very rare- I would say *some* salaried middle class. Most people bought Gold indirectly as Jewellery for dowry and still do. I don't think Govt duties are going to change these habits formed many centuries ago. I also don't think Black Market smuggling will be profitable for a 1% tax on Gold import, it has to be much higher like in early 90's.

[hayekvindicated]

Re: India Doubles Import Taxes on Bullion to Raise Cash

I have to disagree here. Most People I know never kept money in the bank. Many pooled their money via relative to buy small parcels of land, buy Gold mostly, but never put in a Bank.. The number of people putting deposit in a bank is very rare- I would say *some* salaried middle class. Most people bought Gold indirectly as Jewellery for dowry and still do. I don't think Govt duties are going to change these habits formed many centuries ago. I also don't think Black Market smuggling will be profitable for a 1% tax on Gold import, it has to be much higher like in early 90's.

Salaried government servants tend to hoard money in bank accounts (or used to - its a generational thing; a couple of generations ago, this was the norm among many communities). It was cretainly the norm in my family to a great extent - and it turned out to be a disastrous strategy.