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Jewelers in India End 21-Day Strike

Overview

Published: 04/27/2012

by By BLOOMBERG NEWS

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Jewelers in India, the biggest bullion buyer, suspended a nationwide strike after the government assured them it would consider their concerns about a tax on nonbranded gold ornaments.

The 21-day strike ended after jewelers met with Finance Minister Pranab Mukherjee, who had proposed a 1 percent tax on nonbranded jewelry for the first time and a doubling of import duties on gold bars, coins and platinum in his March 16 budget speech, according to an e-mailed statement from the All India Gems and Jewellery Trade Federation.

“The minister assured that he would consider the demand for the rollback of excise duty favorably,” Bachhraj Bamalwa, chairman of the trade body, told reporters in New Delhi after meeting with Mr. Mukherjee.

The strike cost the industry about 200 billion rupees, or $4 billion, in lost revenue, he said.

The end to the shutdown may increase Indian imports, helping sustain the 4.5 percent rally in gold prices this year. Bullion is rising as the European debt crisis and concerns that global economic growth may slow create a demand for protection of wealth.

Mr. Mukherjee proposed raising the import tax on gold for a second time this year as part of steps to curb the current-account deficit, which has partly been stoked by record bullion purchases.

The import duty on gold bars and coins and platinum was to be raised to 4 percent from 2 percent, after doubling in January.

A tax on gold ore, concentrate and bars for refining was to be doubled to 2 percent, and an excise tax on refined gold would climb to 3 percent from 1.5 percent, he said.

India’s current-account deficit widened to $19.6 billion in the three months that ended in December, up from a revised $18.4 billion in the previous quarter, the central bank said in a report last month. That is the widest quarterly gap since at least 1949, according to Bloomberg data, and threatens to revive pressure on the rupee. The currency fell 16 percent last year.