Nirmala Sitharaman, union commerce and industry minister in the Modi government, has made a suggestion to her Finance Minister Arun Jaitley to reduce the import duty on gold, which is currently at 10%.
"That (reducing import duty on gold) I am saying since day one because gems and jewellery sector has been badly affected," PTI quoted her as saying recently.
"So we have been telling the finance minister if it is possible to free that," she added.
If Finance Minister Arun Jaitley accepts her suggestion, gold prices are poised to come down in India.
While high levels of gold imports are often linked to the current account deficit widening, there is a flip side if gold imports go down drastically, since imported gold is converted into jewellery and exported. Therefore, high levels of duty make Indian gold jewellery less competitive in the global market.
The NDA government's efforts to lure Indians with parting with their gold through the gold monetisation scheme has evoked a lukewarm response, dampening plans to cater to gold demand without resorting to imports.
It will take a while to encourage Indian households and institutions to part with some of their gold holdings, estimated at 20,000 tonnes.
The scheme launched on 5 November by Prime Minister Narendra Modi, has managed to garner a mere 400 gm from Indians. A lot of gold is held in the form of gold bars and coins by individuals, who, according to Sandeep Kulhalli, senior vice president-retail & marketing-jewellery division (Tanishq), Titan Company, "would not like to expose themselves," given the current KYC norms.