Amid a lot of opinions and expectations circulating, the World Gold Council (WGC) has voiced concerns about the possible repercussions of increasing import duties on gold in the upcoming Union Budget 2025. In one of its reports, ANI reported that the WGC has warned that if import duties on gold are increased, it could possibly harm the progress made in the industry since policy changes last year.

"Any increase in import duties could result in unintended consequences," warned Sachin Jain, Regional CEO for India at WGC, as quoted by ANI. He elaborated that higher tariffs might lead to a rise in gold smuggling, a sharp rise in gold prices in india, causing a setback for an industry that has recently started to hold ground.

Positive Outcomes of Last Year's Duty Reduction
The government's decision in the Interim Budget in July 2024 to slash total customs duty on gold from 15% to 6% has had a huge impact on the industry. After this reduction was announced, gold prices in India dropped by about 10% across purities. While this was a welcome relief for buyers as prices became more affordable, it likely disappointed those holding gold ETFs and Sovereign Gold Bonds (SGBs), as the value of their investments also declined.

On the other hand, the WGC said this step reduced illegal gold imports, improved official trade, and helped create a more transparent and organized market. "This reduction in duties has encouraged domestic gold purchasing and boosted the sector's overall health," Jain noted.

Gold Industry and the Indian Economy
The gold industry is a significant driver of India's economic engine, contributing approximately 1.3% to the country's GDP. Additionally, it provides employment to an estimated 2-3 million people, making it a critical sector for both urban and rural livelihoods.

Jain emphasized the need to sustain this progress, urging the government and stakeholders to work together. "It is imperative for all involved government bodies, financial institutions, and industry players to collaborate and create a synergetic environment. This will ensure the gold industry continues to innovate and significantly contribute to India's economic growth," he stated.

WGC Urges for Supportive Policies
In his pre-budget note, Jain expressed hope that the upcoming Budget 2025-26 would feature progressive and industry-supportive measures, similar to the reforms of the past decade. These policies, Jain added, should balance the needs of stakeholders while ensuring the long-term sustainability of the gold sector.

Stakeholders across the gold value chain are now eagerly awaiting announcements that could further strengthen the industry's position. The WGC has reiterated its appeal for measures that build on the positive outcomes of last year's tax reductions.

With just five days to go for the Union Budget announcement, the entire nation is eagerly awaiting the government's plans. Economists worldwide are closely monitoring the key areas that require attention and reforms, alongside new fiscal strategies. The country is now looking to policymakers to address these challenges while keeping a strong focus on long-term growth sectors like gold.

Courtesy: Good Returns