Indian Gold Dealer: Government Blames Gold For Account Deficit, Crushes Demand By 86% With Punitive Taxes
July 9, 2013 | By Tekoa Da Silva
I had the chance this morning to reconnect with Vishal Vyas, head of operations at India’s top bullion dealer, Pushpak Bullions Pvt. Ltd.
It was a sobering conversation, as Vishal indicated that the Indian government has just stepped in and crushed the domestic gold market with punitive taxation and trade controls. He also indicated that Dubai is now becoming a major recipient of “gold tourism”—with tourists flooding into the United Arab Emirates in order to buy gold.
Speaking to the recent steps taken by the Indian government to smash demand coming from the world’s largest gold market, Vishal said, “In India, due to the monetary policy and pressure from the finance ministry to control the current account deficit, the government is trying to curb the import of gold into India. They [just] increased customs duties by 2%, which is now at 8%. Apart from that, they have also banned the import of gold on a consignment basis—which was the normal practice worldwide to import gold.”
These new measures have crushed domestic Indian demand by about 86% Vishal noted, in that, “As far as the number I have come across, only 28 tonnes of gold was imported [during] the month of June…[in] March, April and May, I think it was more than 200 tonnes…so there is a big, big change now.”
In terms of why the Indian government is waging such a battle against gold, Vishal explained that, “The government has totally blamed gold imports for the current account deficit…as the major reason [why] dollars are moving out of the country. So the finance minister himself had urged Indian investors not to invest in gold, and not to import much gold. So I think all of the banks have stopped importing gold on a consignment basis, and even the private players [stopped] doing it.”
Commenting on the contrasting market of the United Arab Emirate’s largest city, Dubai, Vishal noted that, “In UEA the situation is different, there is a lot of demand here…the dollar and dirham are pegged, so it is very easy for investors to buy in, and the pricing structures are very transparent…[so] there is good demand in UAE for jewelry as well as small denomination coins, gold chains, etc…[but] the most important thing is that it’s a tourist destination.”
This tourist element according to Vishal, is resulting in, “gold moving from Dubai to Hong Kong.”
As a final word to eastern investors and those worldwide considering gold, Vishal said lower gold prices are, “A good sign for buyers. They can buy at the correct price…instead of jumping in to buy at any price, one [can] wait for the correct price, and then invest.”
This was a powerful interview conducted with one of the largest bullion dealers in India. It is required listening for precious metals investors and serious market students.
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To learn more about Pushpak Bullions, visit: PushpakBullions.com
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Tekoa Da Silva
Bull Market Thinking