Gold Tax Increases in India

February 21, 2013

Unlocking Word Meanings 
Read the following words/expressions found in today’s article.

1. straits 
[streyts] (n.) – serious difficulty or problem

Example: The company experienced financial straits because of the bad economy.

2. profitable [PROF-i-tuh-buhl] (adj.) – able to produce many benefits, such as  money, for someone
Example: Mr. Mario, a jeweler, has a profitable business selling diamond rings and necklaces.

3. hike [hahyk] (n.) – a sudden increase of something
Example: The workers have requested for a salary raise after the recent tax hike.

4.  boom [boom] (v.) – to greatly develop; to have successful growth
Example: The gold industry boomed because of the high demand for gold jewelry.

5. asset [AS-et] (n.) – an important property owned by a person
Example: Having many assets such as cars and houses can increase a person’s yearly taxes.

Read the text below.

India, the world’s highest gold importer, has increased gold import taxes to reduce people’s demand for gold.

Gold accessories have long been traditional gifts during Indian weddings and festivals. People in India own about 20,000 tons of varied gold products.

However, high gold imports have put the country in financial straits. India spends $56 billion for around 700 tons of imported gold, equal to 11% of the country’s total imported products.

India’s finance minister, P. Chidambaram, said that the country could no longer afford more imports and has asked people to lessen their demand for gold. N. Bhanumurthy, a professor at the National Institute of Public Finance and Policy, also commented that gold is not a profitable investment nor does it help save money.

To reduce gold imports, the government raised import taxes thrice last year, and gold prices increased by 13%.

Gold has become even more expensive since the most recent 4% to 6% tax hike. The current price of gold in India is about $540 for every 10 grams.

However, jewelers believe gold businesses may still do well, as demand for gold will likely continue to boom despite the price hikes.  

Indian marriages are increasing, and gold will likely remain a common gift. Additionally, 2/3 (two-thirds) of Indians live in rural areas, and many people from these places still consider gold an asset because of the lack of banking facilities near them.

Viewpoint Discussion 
Enjoy a discussion with your tutor

Discussion A

  • Why do you think a lot of people value gold?
  • Are gifts only special if they are expensive like gold? What makes you say so?

Discussion B

  • Can you think of things that are very expensive in your country? Why do you think they are so expensive? 
  • If an item you really like suddenly became expensive, would you still try to buy it? Why or why not? 


February 21, 2013