Government has recently raised duty on gold imports to 8% in a bid to reduce gold imports. High gold imports have been contributing to India's high current account deficit. But the increase has had an opposite effect. Government should now threaten to reduce the duty to zero. Imagine if you want to buy gold and there is this threat by government to reduce duty on gold, what would you do?
Government should keep the markets in limbo. This uncertainty and threat would work against gold buying and investors would defer their decision of buying gold to a later date reducing gold imports and further fueling a decline in gold prices.
