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Last updateTue, 17 Mar 2015 2pm

India hikes import duty on Gold Jewellery to 15%

The Indian government has raised import tax on gold jewellery to 15% from 10% in a bid to stem heated demand for the precious metal.

The move comes after imports of gold jewellery rose after the government increased duties on import of raw gold, including bars and coins, three times this year.

Recent drops in prices has led to unprecedented demand for gold in India which has in turn led to a widening of the country's current account deficit, the difference between exports and imports. 

That deficit stood at a record high of 6.7% of Gross Domestic Product in the final quarter of the 2012 financial year, the last quarter for which results are available.

The current account deficit was one of the reasons for a lack of confidence in the Indian economy which has led to a decline in the Indian rupee and a flight of much needed investor funds out of the country.

India is the world's biggest consumer of gold and many ordinary people see the metal as a secure, long-term investment.

The government has been trying to rein in the growing demand. It has raised the import duty on raw gold three times this year - the latest increase taking the duty to 10%.

However, that resulted in imports of jewellery rising, as it had left the duties on that segment unchanged.

India's finance ministry said: "There is an apprehension that Indian jewellery makers would not be able to compete with cheaper imports, particularly when the majority of the imported jewellery is machine-made, as compared to handmade jewellery in India."

It added that it was raising the duty on jewellery to "protect the interests of small artisans".

Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation, told the BBC: "This is a good move for the local industry and it will support the manufacturing sector."

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