India imported $55 billion worth of gold last year

The government has cut the amount of gold someone can bring as personal baggage from abroad even as India’s gold imports are expected to have increased to 1.08 million kg last year, worth $55 billion at current prices.

The government has cut the amount of gold a person can bring into the country to 1 kg from 10 kg, and silver to 10 kg from 100 kg.

The allowance is only applicable for those who have are returning after a stay of at least six months in a foreign country. Passengers will still have to pay the regular import duties.

The government said the move was prompted by complaints by jewelry associations.

Jewelry make money in the form of ‘making charges’ ranging from about 2 to 15 percent when they sell gold jewelry.

However, with the steep rise in gold prices seen in the last two years, the making charges have gone up in absolute (or rupee) terms. Such charges are often lower outside India, the world’s number one gold market.

The 10 kg provision was having an adverse impact on the domestic jewellery industry as more and more people started bringing gold from outside, the government said.

“A representation from All India Gems and Jewellery Trade Federation has been received pointing out the misuse of this facility with a request to reduce the quantity of gold allowed through this channel,” it said.

Separately, the government also revealed that India’s gross gold imports are set to cross the 1 million kilogram mark for the first time in history.

Against total imports of 0.97 million kg in 2010-11, gold imports were already at 0.99 million kg at the end of February.

With an expected 0.09 million of gold imported in March, the total for the last financial year would be around 1.08 million kg, an increase of more than 11%.

At current prices of around $51,000 (Rs 26 lakh) per kg, the total gold imported by India last year was worth $55 billion.

It may, however, be noted that only about 86% of the total gold imported into India is for domestic consumption. The rest is re-exported in the form of jewelry.

India’s roaring appetite for gold, the world’s biggest, is widely balmed for keeping its trade deficit high.