New Delhi, Jan. 2: A proposal to raise the tax on gold import is under consideration in the wake of a bloated current account deficit.
"Demand for gold must be moderated. We may be left with no choice but to make it a little more expensive to import gold. The matter is under government consideration," finance minister P. Chidambaram told reporters.
The government could raise the import duty on gold by 1-2 per cent to 5-6 per cent, said top North Block officials. It had doubled import duty on the precious metal last budget to 4 per cent to check obsessive purchase by Indians.
India imported gold worth $58 billion last fiscal. The higher import duty helped to check gold buys, which have come down sharply by 31 per cent and could be around $40 billion by end-March 2013.
"Increase beyond a point does not pay off. It simply leads to smuggling," officials said.
Top finance ministry officials said they were studying the recommendations of the Reserve Bank to launch financial products which would be gold backed and give returns linked to the rise in gold prices, breaking the tradition to invest in physical gold as a "saving of the last resort".
Huge gold imports have ratcheted up the country's current account deficit to $38.7 billion, or 4.6 per cent of the gross domestic product (GDP), during the first half of the current fiscal. Economists consider any deficit above 2.5 per cent to be alarming.