The government astounded gold bars markets by observance the introduce duty on gold and silver unmoved at 10 per cent in its Union Budget for 2014-15, a move likely to limit out of the country purchases by the second-biggest bullion shopper and further hearten smuggling.
India's major bullion trade group had on Wednesday said the economics minister would likely cut the gold introduce duty to 6 per cent in the just now elected government's first budget arrangement.
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Indian bullion futures jumped 2 per cent on Thursday, widening the premium over global prices which had pointed on the probability of a duty cut.
"This will basically force jewellers, who were on the sidelines pregnant a duty cut, to re-stock," said Sudheesh Nambiath, senior analyst with Thomson Reuters GFMS.
Premiums should get better to $20-30 an ounce in the next few days, he said, against $10 on Wednesday.
India, anxious to orderly a wide open present account shortage, took a slew of actions last year to limit require for bullion, its second-biggest import after oil.
Besides the duty compulsory by the finance ministry, India's central bank also imposed the so-called 80-20 rule that necessary a fifth of all gold imports be re-exported.
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The rules have curly supply and pressed premiums up to as high as $160 an ounce in December.
Market opportunity for a duty cut had climbed after the election of Narendra Modi as India's new prime minister less than two months ago.
Modi, who leads the pro-business Bharatiya Janata Party, had former indicated his enthusiasm to get rid of the gold curbs, saying any action on gold should take into account the welfare of the public and traders, not just finances and strategy.
"Our potential have not been met," said Pankaj Kumar Parekh, vice-chairman of the Gems and Jewellery sell overseas back-up board, which groups more than 3,000 exporters. "We will take up the substance with the finance ministry."
Indian bullion imports plunged by a fifth last year though jewellery and asset require rose 13 per cent, causing a gush in smuggling.
The World Gold Council reckons that 200-250 tonnes of gold have been smuggled into India since the imposition of import controls. Only 2.5 tonnes of smuggled bullion have been seized by law enforcement agencies, according to government officials.