M.P. Ahamed, chairman of the Malabar Group of Companies, which includes an international chain of jewellery, has expressed the fear that the hike in import duty on gold and diamond will spur an influx of smuggled gold into India.
Reacting to the budget proposal of raising the duty from 10% to 12.5%, Mr. Ahamed said this would create a crisis in the gold jewellery business and also lead to an erosion of government revenue. Since gold was duty-free in countries such as Singapore and Malaysia, gold smuggling from these countries would get a boost following the 2.5% duty hike.
He noted that the duty was just 2% in 2012, but was gradually raised to 12.5% now.
There was no fully effective mechanism in India to check gold smuggling through the airports, he said.
