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Saturday, March 17, 2012

Full Bloom Cultural shock for Indians! Glittering Glod fades in Pranab`s fiscal Discipline!Jewellers across the country on Saturday went on a flash strike !

Full Bloom Cultural shock for Indians! Glittering Glod fades in Pranab`s fiscal Discipline!Jewellers across the country on Saturday went on a flash strike !

Troubled Galaxy Destroyed Dreams, chapter 755


Palash Biswas


http://indianholocaustmyfatherslifeandtime.blogspot.com/



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Full Bloom Cultural shock for Indians! Glittering Glod fades in Pranab`s fiscal Discipline!Jewellers across the country on Saturday went on a flash strike ! every Multi National Company Employee employee sent to India from abroad is taught first to avoid Cultural Shock. In india Gold is an ingredient part of Sociocultural and Religious life! indian women are very very Possesive and the Men Passionate about Gold. As a senior Politician Pranab babu should have been aware of the deep impact imminent. However he had witnessed how Government of india discredited itself with putting Gold on auction.India, the world's biggest bullion buyer, increased the tax on gold imports for the second time this year after record purchases widened the current-account deficit. Gold fell.The government will tax gold bars and coins and platinum at 4 percent, Pranab Mukherjee, finance minister, said in his budget speech for the year starting April 1. That's up from 2 percent set in January. There was no change on the silver tax.The fundamental reasons for buying gold jewelry are unchanged!They are rooted in Indian culture and weddings. Investment demand is driven by the need to protect against inflation, ease of liquidity and the increasing use of gold as a monetized asset to secure loans.

Jewellers across the country on Saturday went on a flash strike protesting against the proposed excise duty of one per cent on unbranded precious jewellery and doubling of customs duty on standard gold bars and coins.The All-India Gems and Jewellery Trade Federation had initially decided to go on an indefinite strike but later said that it would be for three days.The federation said that the representatives of various associations of jewellers would meet finance minister Pranab Mukherjee after Monday to discuss the problems that would arise due to the imposition of excise duty and the hike in Customs duty to 4% proposed in the Budget.

The glitter of gold just got fainter. The finance minister on Friday doubled import duty on standard gold from 2 to 4% and for non-standard gold from five to 10%. This is the second increase in customs duty on gold since the start of this year. Earlier in January, the government had increased duty from 1% to 2%.While the industry has been still struggling to stand up from the after-effects of recession, such a step will certainly hit the industry hard.The import duty will increase the price of domestic gold. That means with the series of duty hikes, the price you pay is going to rise.

Close to three lakh jewellers under the trade federation have joined the strike, shutting all jewellery establishments during March 17-19.Jewellers across the country have shut their shops till Monday, to protest against the increase in customs duty and introduction of excise duty for non-branded jewellery as proposed in the 2012-13 Union Budget. Bullion and jewellery traders in several parts of the country, including Delhi and Mumbai today downed shutters for three days in protest against the Budget proposal to raise duty on gold imports and levying excise on unbranded jewellery.

The Union Finance Minister, Mr Pranab Mukherjee, has proposed to bring unbranded precious jewellery under the excise duty net and raise customs duty on gold bars and coins.

There is also a proposal to increase import duty on gold from two per cent to four per cent.

This apart, the Government has also proposed to levy one per cent tax for cash purchase of jewellery worth more than Rs 2 lakh.

The move will not only affect the domestic industry but also encourage smuggling of gold, said Mr Bachhraj Bamalwa, Chairman, GJF. "Jewellery worth over Rs 2 lakh sold to a customer on cash will now attract one per cent tax to be collected at source," he said.

Gold was largely unchanged on Friday, but posted its second-biggest weekly decline this year due to an early week drop after the Federal Reserve withheld additional easing amid a string of encouraging US economic data.The metal fell 1% earlier in the session after top gold consumer India said it would double import duties on bullion.Oil's rally, the dollar's weakness and higher US consumer prices in February prompted gold investors to cover short positions from earlier this week.Some funds might have exited the gold trade after the S&P 500 stock index this week hit 1,400 for the first time in four years after a strong run of US job and manufacturing data confirmed a decent pace of economic recovery.The metal's 3% slide this week removed gains in January based on expectations of further US monetary easing. The Fed offered few clues this week on any further action after it said in late January it would keep rates near zero for the next few years.

India doubled the tax on gold and silver on Jan. 17 by imposing a levy on imports as a percentage of the price, compared with the previous system of tax by weight. Global bullion prices rallied for an 11th year in 2011 as purchases by India peaked at 969 metric tons. Futures in India gained 32 percent last year, exceeding the 10 percent advance in global prices, as the currency slumped to a record low.
"The Indian market will wait for lower prices and there is also the risk that this duty hike will lead to increased smuggling," Edel Tully, an analyst at UBS AG in London, said by e-mail today, in response to questions from Bloomberg News. "Today's duty increase will dampen Indian demand."
Gold for immediate delivery fell 0.2 percent to $1,655.54 an ounce at 5:52 p.m. in London.

The import duty on so-called non-standard gold doubled to 10 percent and the levy on ore, concentrates and so-called dore bars doubles to 2 percent, Mukherjee said in his speech.

"One of the primary drivers of the current-account deficit has been the growth of almost 50 percent in imports of gold and other precious metals in the first three quarters of this year," said Mukherjee. "I have been advised to strengthen the steps already taken to check this trend."

The excise tax on refined gold climbs to 3 percent from 1.5 percent and the government will also levy a 1 percent excise duty on non-branded gold jewelry, the minister said. Jewelry purchases in excess of 200,000 rupees will attract a 1 percent tax from July 1, he said.

"The demand will reduce in the short-term," said N. Balaji, general manager at MMTC Ltd., the country's biggest gold importer. "As people in India like to invest in gold as a safe investment for longer-term, people will accept this hike after some time," he said by phone from New Delhi.
Imports may drop to $38 billion in the year starting from April 1 from $58 billion this year, Chakravarthy Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said in a report last month. Consumption fell 7 percent to 933.4 tons in 2011 as the currency plunged, cooling purchases for festivals and marriages, according to the World Gold Council.

If you are looking to purchase gold jewellery, you can expect at least a 6-7 per cent increase in their prices.

This is because the Union Budget has proposed the duty on gold imports to be doubled to 4 per cent and excise duty on refined gold to be hiked from 1.5 per cent to 3 per cent.

As the justification for enhancing these duties, the Finance Minister, Mr Pranab Mukherjee, said, "One of the primary drivers of the current account deficit has been the growth of almost 50 per cent in imports of gold and other precious metals in the first three quarters of this year."

"I have been advised to strengthen the steps taken to check this trend," he said. Gold and silver imports during April 2011-February 2012 had touched $55 billion, registering a 38.5 per cent growth over the same period in the last fiscal.

"We will appeal to the finance minister to remove excise duty on both branded and unbranded jewellery and hoping for a positive outcome," GJF Chairman Bachhraj Bamalwa told PTI.

According to reports coming in, nearly 90% of the jewellers in the country have supported the bandh call and kept the shutters down today, he said.

The Union Budget for 2012-13 has proposed excise duty of one per cent on unbranded precious jewellery and doubling of customs duty on standard gold bars, gold coins and platinum to 4%.

'Move may lead to gold smuggling'

Recalling that the Government had hiked the import duty on gold from 1 per cent to 2 per cent only in this January, Mr Rajiv Jain, Chairman, Gems and Jewellery Export Promotion Council, told Business Line that the Budgetary proposals would mean a 400 per cent hike on the commodity from pre-January 2012 levels.

"The 4 per cent import duty on gold will encourage all kinds of unethical practices. The country will go back to the preliberalisation era when gold smuggling and money laundering prevailed," he said.

Mr Jain said the low duty on gold till the last year had helped in bringing more businessmen to the organised gems and jewellery sector from the unorganised.

He said while earlier excise duty was imposed only on branded jewellery, the Budget now has covered all kinds of jewellery under excise. "We had asked the Government to do away with excise duty," he said.

No impact on exports

However, gems and jewellery exports will not be impacted as the refund of duties through the duty drawback mechanism will take care of the increase in the Customs and excise duties. "But domestic prices of gold jewellery will go up by at least 6-7 per cent," Mr Jain said.

Also, the budgetary proposal to fully exempt branded silver jewellery from excise duty (of 1 per cent) will result in an increase in the number of branded silver jewellery items. Currently, there are only a few brands in that segment.

Significantly, Mr Mukherjee said in his speech that, "To prevent round-tripping, it is proposed to impose basic Customs duty of 2 per cent on cut and polished, coloured gem stones at par with diamonds."


Bombay Bullion Association (BBA) has also extended its support to the strike called by GJF saying that the government move could encourage smuggling of gold.

"The Customs duty on gold has been raised to 4% ad valorm which will increase the price per kg to about Rs 56,000. The total duty per kg would be to the extent of Rs 1,12,000 which will encourage imports through illegal channels," BBA President Prithiviraj Kothari said.

The levy of excise duty would require huge paper work and the system will be prone to misuse at all levels and give rise to inspector raj, he said.

There are overt 50 lakh artisans employed in bullion and jewellery trade and any disruption would affect them and give rise to law and order problem, he added.

Meanwhile, The Gems and Jewellery Export Promotion Council said on Saturday that it was still examining the Budget.

"After going through the finer points, we will approach the government by Tuesday or Wednesday and discuss the issue with them," GJEPC Chairman Rajiv Jain said.

Branded gold jewellery makers say the move will trigger an increase in prices in the range of 2.5% - 4% from early next month.

More still, a new tax on cash purchase of bullion or jewellery above Rs 2 lakh has been introduced to curb black money transactions.

"One of the primary drivers of the current account deficit has been the growth of almost 50% in imports of gold and other precious metals in the first three quarters of this year," Union finance minister Pranab Mukherjee said.



World's top gold importer, India imported 969 tonnes in 2011 - over half of this driven by jewellery. "The doubling of import duty will bring down imports by over 30% and lead to imports through illegal channels," feared Prithivraj Kothari, president Mumbai Bullion Association. Gold traders across the country are likely to protest the decision, says Deepak Choksi, Gujarat regional chairman of All India Gems and Jewellery Trade Federation.

The move is also likely to impact demand and turn investors away from gold to other instruments, say experts. Gold prices saw a rally in financial year 2011-12 due to global cues and inconsistent equity markets.

"FM's biggest challenge was fiscal consolidation. The duty hike on gold in a longer run may help in appreciation of rupee though it will hit physical imports. With mounting crude price pressure the government was bound to make such a move," said Naveen Mathur of Angel Broking.

The duty hike will also impact jewellery exports from India.

A substantial portion of diamond-studded jewellery is made out of gold, platinum and silver. Gold jewellery prices have already increased by 3% on an average since January this year. But with gold prices mostly influenced by international rates and low manufacturing rates in India, branded jewellery retailers expect a minimal impact of the increase on consumption levels.

"There will of course be a direct translation of increase in customs duty into price hikes around 3%. However, we will not be hugely affected. With a 1% excise duty imposed on unbranded jewellery, this will give a level playing field to the branded and unbranded segments," said Vijay Jain, CEO Orra.

Sanjay Kothari, vice-chairman, Gems and Jewellery Export Promotion Council (GJEPC) said, "Diamond jewellery always goes with gold. Like US, China, Japan and other foreign countries, India is fast emerging as the diamond jewellery consumer market. But, the duty hike would undermine the growth of the diamond-studded jewellery segment."

Mehul Choksi, chairman and managing director, Gitanjali Gems Ltd said, "The levy of excise and customs duty on gold and gold jewellery-both branded and non-branded-will impact the jewellery consumers. Again, custom duty increase on gold bars and refined gold will impact the investment in gold, for which our country is famous the world over."

Branded silver jewellery has been fully exempted from excise duty. Non-branded gold jewellery is also brought under the 1% excise duty announced for branded gold jewellery last year.

The finance minister has proposed a 2% import duty on coloured gems stones-on the lines of cut and polished diamonds-to curb round-tripping, or illegal repeated exports and imports of gems.

"It is good for the overall health of the $28 billion Indian diamond industry. But coloured gems stones import in the country is very negligible and it will not have much impact on the industry," said GJEPC officials.



With bullion now trading well below its long-term technical support, gold could extend losses in the short term before recovering, analysts said.
"Every retracement within this bull trend (since 2001) has managed to find a floor close to the 55-week average," said Tom Fitzpatrick, analyst at CitiFX, Citigroup's technical research unit.

In the next few weeks, gold could test a low at USD 1,580 an ounce, which could set the stage for another leg higher, Fitzpatrick said.
Spot gold eased 0.1% at USD 1,656.54 an ounce by 2:53 p.m. EDT (1853 GMT).

US April gold futures settled down USD 3.70 at USD 1,657.50 an ounce. Volume was largely in line with its 30-day average but lower than its previous session, preliminary Reuters data showed.

US inflation data for February showed consumer prices rose by the most in 10 months as the cost of gasoline spiked, but there was little sign that underlying inflation pressures were building up.

Also weighing on gold this week was a rise in 10-year US Treasury yields, a gauge for short-term US interest rates, which topped 2.3%, their biggest one-week rise since early July 2011.

Silver is the only precious metal that ended higher for the day, but it was down 4.5% for the week. The weekly decline may have set the stage for even steeper losses with a potential drop to USD 27.50 an ounce, analysts said.

Barclays Capital technical analysts said silver had been in the process of unwinding its oversold condition. But with silver's break below USD 33.25. they said silver has reverted the trend and is targeting USD 30 per ounce.

Silver was up 0.2% on the day at USD 32.56 an ounce.

INDIA HIKES BULLION DUTIES

Gold imports to India, the world's top importer, are likely to fall significantly in 2012 as the government's decision to double import duty to 4% is seen squeezing local demand, especially for jewelry, industry officials said.

Bombay Bullion Association President Prithviraj Kothari said the increase would prompt a rise in smuggled gold and impact the jewelry sector more than the investment sector.

"We will have to wait and see how (the import duty) works but from the outlines we are seeing, it will be slightly bearish for gold in the immediate future," MKS Finance head of trading Afshin Nabavi said.

Platinum fell 0.6% to USD 1,670.24 an ounce, while palladium was down 0.5% on the day at
USD 697.22.
2:53 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold APR 1655.80 -3.70 -0.2 1639.70 1664.90 146,090
US Silver MAY 32.604 -0.122 -0.4 32.135 32.755 34,971
US Plat APR 1675.50 -8.40 -0.5 1664.20 1693.20 5,215
US Pall JUN 701.70 -8.20 -1.2 697.80 708.25 1,455
Gold 1656.54 -1.19 -0.1 1640.18 1664.40
Silver 32.560 0.060 0.2 32.140 32.720
Platinum 1670.24 -9.64 -0.6 1667.50 1690.00
Palladium 697.22 -3.83 -0.5 698.98 704.72
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 176,376 185,194 193,964 19.54 -0.67
US Silver 41,383 68,514 73,884 32.8 -0.38
US Platinum 6,791 8,446 8,312 23.94 0.44
US Palladium 1,459 5,348 4,684

Budget 2012: Gold import curbs to buoy rupee

Gaurav Kapur | Saturday, March 17, 2012
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Gaurav Kapur

in 2012 so far, there has been an improvement in foreign portfolio capital inflows which has been crucial in stabilising the rupee, after sharp depreciation since September 2011. Sustenance of these flows and, therefore, continued support for the rupee is dependent on government's efforts to revive growth and control inflation in the coming fiscal year. In that context, fiscal consolidation was crucial as fiscal slippage with rising subsidies in the current fiscal year stoked inflation and deterred the RBI from cutting rates.
Against this backdrop, market participants were looking for the finance minister to deliver "credible" fiscal consolidation while supporting growth by reviving investment activity and addressing supply side deficits in the infrastructure and farm sectors. The Budget delivers on reasonable fiscal consolidation with an eye on supporting growth. The fiscal deficit target for next fiscal has been pegged at 5.1% of GDP down from 5.9% in the current fiscal.
Moreover, fiscal consolidation is based on a lower subsides bill, higher indirect tax revenues while maintaining overall spending growth in line with nominal GDP growth.
Article continues below the advertisement...


In order to channelise household savings into productive asset creation, the finance minister (FM) provided a tax incentive to individuals to invest in equities and penalised gold imports by increasing customs duty on certain categories. Higher import duty on gold products would be positive for the rupee, as during the current fiscal year gold imports crossed $50 billion, thereby adding to the pressure on the rupee from a growing oil imports bill. The size of net market borrowings is budgeted to go up to Rs4.79 lakh crore from Rs4.36 lakh crore in the current fiscal year.
That is bound to put upward pressure on interest rates in the economy.
The FM delivered partially on improving the supply side. The focus here was on the infrastructure sector, particularly power, where access to foreign capital via external commercial borrowings (ECBs) was eased and some tax concessions were given.
On the whole, Budget 2012 with a focus on fiscal consolidation, may provide some support to the rupee ($-Rs rate: 50.19), which otherwise is under pressure again from a strengthening dollar and rising oil prices.
Gaurav Kapur Senior economist, Royal Bank of Scotland N.V.
http://www.dnaindia.com/analysis/column_budget-2012-gold-import-curbs-to-buoy-rupee_1663468

Moneycontrol » News » Markets » Brokerage Recommendations

Budget 2012: Will Budget impact surging import duty levied on Gold?

Published on Thu, Mar 15, 2012 at 19:09 |  Source : Moneycontrol.com
Updated at Thu, Mar 15, 2012 at 20:14  
By Chirag Mehta, Fund Manager (Commodities), Quantum Asset Management Company
What will be the Kahaani of the Union Budget this year? With the entire nation in its annual speculation mode, everyone is wondering will Pranab Mukherjeedeliver one that makes sense to the masses or one that appears to be just as useful as a fifth wheel. Amidst this electric atmosphere that's causing markets to ride a rollercoaster of its own, where isgold heading? Traders, suppliers, end consumers all present one common query to Mr. Mukherjee, "Will the Budget do anything for the surging import bill by implementing measures that discourage Gold consumption?"
Import Duties Wasted by Hoarding: There is a widespread view that gold imports are causing a strain on the country's balance of payments. Gold imports have also been credited by the Prime Minister's Economic Advisory Council (PMEAC) as one of the reasons behind India's high Current Account Deficit (CAD) levels, even higher than levels during the Balance of Payments (BoP) crisis in 1991. The PMEAC is further expecting India's CAD to climb up to 3.6% of GDP (CAD levels were at 3% during the '91 crisis).
The RBI has expressed a similar concern about the increasing CAD levels in its recent macroeconomic report.
Since the demand for Gold (and Oil) is largely inelastic in nature, the rising cost of importing such commodities does impact the overall deficit levels.
An equal concern is that the billions spent towards importing gold in 2010-11 was largely unproductive because the imported gold was used for either for making jewellery, kept as gold bars and coins or would be locked up in safes. What an absolute waste! On the contrary if this hoarded gold were channeled towards investment avenues that would yield productive returns, it would add some much needed leverage to the growth of the economy.
This hoarding has actually helped investors when it mattered the most recently. Be it the crisis of 2008 or the stock market turmoil of last year. And what would investors do given the increasing uncertainty and negative real interest rate prevailing - just resort to this time tested element.
Gold Imports are actually Re-exported: The proof of the pudding lies in the eating. Take a look at some of these facts to understand the magnitude of the situation at hand.
  • Imports not only to blame: The imports on a year-on-year basis have remained fairly constant - 969 tonnes this year as compared to 958 tonnes a year before. In reality, rising prices partly on account of depreciation of the rupee have added to the burdening deficit problem.
  • 32% of India's gold imports are actually re-exported: In recent years, India has evolved into a significant exporter of gold jewellery. The demand for gold has increased beyond that required for domestic consumption (for jewellery and investment).
  • Gold imports up 40.23%: During the April-December period of the current fiscal, gold imports were valued at $28.16 billion. Gold jewellery exports were up 41.59% from $8.56 billion in the corresponding period of the last fiscal. The growth in value of gold import and export of jewellery roughly match.
Over the past three years, India's gold jewellery exports have grown by a cumulative 88% to reach a substantial Rs 65,000 crore in 2010-11. Gold imports grew by 64% during the same period. In 2010-11, Net Gold imports were about Rs 1,00,000 crore, comprising 5.7% of total imports and about a third of the current account deficit. Net gold imports (as opposed to simply gold imports) must be considered while assessing the impact of importing gold on the balance of payments.
Jewellery manufacturing is a skill intensive industry and India holds its own as a specialized manufacturer and exporter of world-class designs. With the right kind of stimulus, this industry could emerge as an even bigger hub of jewellery manufacturing leading to increase in exports and employment. In the light of this, banning gold imports or increasing customs duties threaten to re-introduce loopholes like smuggling and would also prove to be counter-productive for the economy as a whole.
Attachments : Budget_Quantum_150312.pdf
http://www.moneycontrol.com/news/brokerage-recos-others/budget-2012-will-budget-impact-surging-import-duty-leviedgold_680965.html
 

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