Budget 2025: What gold and silver jewellery industry expects from FM Nirmala Sitharaman?

Gold prices in India soared to an all-time high on Thursday, January 30, surpassing the ₹83,000 level for the first time. The 22K gold was priced at ₹76,000 per 10 grams while the 24K gold price stood at ₹83,020.

The sharp jump in gold prices comes in the backdrop of broader volatility in the Indian stock markets seen ahead of the Union Budget 2025. Investors have turned to gold in the moment of uncertainty amping up their investment in the precious metal, which is often considered to as a safe haven. The price was supported by the US Fed’s decision to keep the interest steady following two consecutive cuts.

On the other hand, Silver prices stood at ₹98,500 per kilogram on Thursday across major Indian cities, marking a jump of ₹2,000.

The rise in the prices of precious metals is seen as a key development ahead of the presentation of the Union Budget 2025 by Finance Minister Nirmala Sitharaman on February 1.

The gold and silver jewellery industry awaits some favourable announcements, like import duty cut and tax relief to boost consumption, in the upcoming Budget.

What’s in store for gold and silver markets?

Import Duty Cut

In the previous budget, Finance Minister Nirmala Sitharaman slashed the import duty on gold by 9%, reducing it from 15% to 6%. This move, the sharpest reduction in import duty, helped drive gold consumption by making the prices more affordable. However, amid the geopolitical uncertainties gold prices have been on the rise in the past few months.

Industry experts are hoping the import duty on gold could be lowered by another 3%. India, which is the second largest consumer of gold, relies mostly on imports to meet the majority of gold demand. A lower import duty is likely to trigger a boost in demand, making gold more accessible to consumers and potentially easing the pressure of high prices. A lower import duty is also likely to discourage illegal imports of the metal, making smuggling less profitable.

Incentivising Gold Monetisation Scheme

The government introduced the gold monetisation scheme in 2015 with hopes to mobilise the idle gold in households, institutions, corporates and temple trusts to be used for more productive purposes. The move was aimed at reducing India's dependence on imports. The scheme allowed gold depositors to earn interests at the rate decided by the government. However, nearly a decade since the launch, the gold monetisation scheme has struggled to make a large-scale impact. Experts predict the government will announce measures to make gold monetisation more attractive.

Digital Gold Regulations

Digital gold has emerged as a cost-effective and accessible way of buying and owning gold. Unlike physical gold, investments in digital gold can be made with as little as ₹100, making it an attractive option for smaller investors. This form of investment has gained popularity, especially among the younger generation of investors. The digital gold market in India has grown from about 45 tonnes in 2020 to 70 tonnes in 2024.

However, the absence of a regulatory framework for digital gold has hindered the exploitation of its full potential. Industry experts expect an announcement about the appointment of a market regulator in the digital gold space.

Tax Relief

Gold purchase in India falls under the 3% GST bracket. On the other hand, 5% GST is being levied on the Gold jewellery making charges. The jewellery industry is hopeful of a revision in the tax rates to boost demand. Further, a relief in the income tax is also awaited by the jewellery market. Income tax relief will increase disposable income in the hands of the taxpayers and boost consumption.

How Gold Market Reacted To Budget 2024?

A day ahead of Finance Minister Nirmala Sitharaman's Full Budget presentation on July 23, 2024, the yellow metal traded at ₹67,700 for 10 grams of 22K gold and ₹73,850 for 10grams of 24K gold on July 22.

The prices dropped to ₹64,950 per 10 grams of 22K gold and ₹70,860 per 24K gold variety on the Budget day on July 23, despite an announcement of import duty cut.

On the next of the Budget 2024, gold prices remained nearly flat at ₹64,960 (10 grams of 22K gold) and ₹70,860 (10 grams of 24K gold).

Here’s how gold prices fared in the week of the presentation of Union Budget 2024: