India has raised basic import duty on gold to 12.5% from 7.5%, according to a gazette notification on Friday. The move comes amid surging trade deficit and falling currency.
India’s trade deficit widened to a record high of $24.29 billion in May. Gold imports stood at $6 billion in May. The higher trade deficit is expected to lead to India’s current account deficit widening to 2.5-3% of GDP in the current financial year. The current account deficit was at 1.2% of GDP in FY22.
The widening deficit and slower capital flows have put pressure on the Indian rupee, which fell to a record low below 79 against the U.S. dollar on Friday.