On February 1, 2021, India’s Finance Minister Nirmala Sitharaman announced the national budget 2021 much to everyone’s anticipation following the slump of the COVID-hit economy. Apart from big announcements like 137% spike in healthcare allocation, major highways projects and several bank divestments, she also announced a cut in customs duty for gold and silver to 7.5% from 12.5%, much to the cheer of customers jewellery retailers. How does the cut in customs duty for gold make a difference to the common man and gold vendors?
Impact of customs duty for gold on the market
Import duty or customs duty for gold is nothing but the tax levied to transport precious metals like gold and silver across international borders. This duty is levied in order for the government to raise revenues, regulate good movement and safeguard the domestic industries.
In July 2019, when the customs duty for gold was raised at 10%, the cost of gold shot through the roof hovering at Rs. 3,200 per gram as opposed to Rs.3,000 per gram in January. This hike in price coupled with the pandemic induced lockdown shattered the demand of gold in the market due to two reasons
- People were not physically allowed to visit jewellery stores and purchase
- The skyrocketing cost of gold was a major deterrent for a salaried household to buy and invest in gold
This caused a 14.23% dip in gold imports in India during the year 2019-20 despite its reputation of being the second largest consumer of gold and silver globally. Around 96% of its precious metals is imported from countries like the UK, Peru, Hong Kong and Bolivia to meet the huge gold demand in India.
At this backdrop came the much awaited budget 2021 declarations and much to everyone's please the government with careful consideration and intention to boost the gold demand and revive the economy, announced a huge cut in customs duty on gold in India. This simply means that buying these precious metals from other countries will now be cheaper. However, the revision from 12.5% to 7.5% comes with an added agriculture cess which will be used for agricultural infrastructure and development. This still amounts to a 2.5% cut in import duty.
Experts observed that the cost of gold will come down after the reduced duty which will be a huge positive for the demand-crippled jewellery industry. They said that gold as a precious commodity will be better accessible for lower middle class and middle class families after the revision of customs duty. This will not only regulate the disparity in cost of gold in India vis-a-vis the international market but also curb illegal trade of the commodity.
Gold jewellers take on the duty cut
Retail jewellers expressed joy with the cut of customs duty on gold in India as they were expecting to have a good business owing to many customers enquiring about wedding jewellery purchase as the season is likely to extend till mid-July. The gold prices last year reached an eight year-high due to the pandemic, deterring buyers from purchasing gold jewellery even for weddings. This severely affected the livelihood of gold retailers in the country.
What should you do with the fall in gold prices?
Invest! Gold has proven time and again to be an excellent asset to invest in especially in India as the yellow metal has a high value of auspiciousness along with a symbol of wealth and status. Rather than investing in immovable assets like property which is extremely expensive and elusive to the monthly-salary earner, buying and saving gold jewellery is feasible and garners better returns on investment. Why should you invest in gold? Here are some reason:
- Inflation-proof character- The cost of gold for long has been proven to withstand inflation with gold prices being unaffected by inflation. This means you won’t suffer a loss even when inflation hits and currency rates drop in the global market.
- Creation of wealth - As mentioned above gold is considered a symbol of wealth and legacy as it is passed on through generations in a family marked by sentiment of prosperity.
- Less risk - If you have dabbled with various forms of investment or starting out newly you will realise how simple investing in gold is as compared to property, bonds etc as it involves much lesser risks
- Easy to liquidate - When investing this is the most important factor that people look at as it should come in handy as a financial backup when you need money. Gold is one of the easiest assets to liquidate and acquire required cash during emergency expenses.
In case you have sentimental value attached to the gold and do not want to entirely sell your gold jewellery but are in a cash crunch, you can opt for a gold loan. A gold loan is a process where you pledge your gold jewellery as an asset and the lender offers you a loan amount at an interest rate against the gold given that is determined using a gold loan calculator. Much like investing in gold, a gold loan too has numerous advantages, some of them being:
- Easy documentation process
- Lower interest rates
- High loan-to-value ratio
- Affordability and easy accessibility
- Instant loan disbursement
Rupeek an online gold loan company offers affordable loans with flexible repayment options and a very marginal interest rate starting at just 0.49% per month. Rupeek also has an interesting gold loan calculator feature that allows you to calculate the rate of interest, EMI for the principal amount even before applying. You can apply for a gold loan by simply using the official Rupeek website and clicking on the apply now button. Highly trained professionals will visit your home and complete the KYC process, gold evaluation and explain the exact worth of your gold. Once the documents are verified the loan amount will be credited to your account instantly!
So make the most of the drop in gold prices and invest in them for your future needs.