The power of words often surpasses that of actions. Finance Minister Nirmala Sitharaman proved it with a single announcement. She cut the customs duty on gold in the Union Budget 2024. This led to a sharp fall in gold prices, Over ₹10.7 lakh crore wipe off in one day. This event marked one of the largest wealth erosion in history.
Impact on Indian Households
The Gold price drop wipe off ₹10.7 Lakh Crore hit Indian households the hardest. Indian families own about 11 percent of the world’s gold. This is more than the combined reserves of the USA, Germany, Switzerland, and the IMF. With the drop in the value of gold the savings of millions of households were affected. Gold is a common investment for many families. It holds significant cultural and financial importance.
The Finance Minister announced a reduction in Basic Customs Duty on gold and silver. The duty was cut from 15 percent to 6 percent. The Agriculture Infrastructure and Development Cess was also reduced from 5 percent to 1 percent. This effectively reduced the overall tax on gold from around 18.5 percent to 9 percent.
Gold traders reacted negatively to the duty cut. Many sold off their holdings to book profits. This massive sell-off contributed to the sharp fall in gold prices. Gold financiers also faced challenges. The reduced value of gold affected their loan-to-value ratios. This made them less financially secure.
Gold traders and financiers were unhappy with the duty cut. Gold price drop wipe off ₹10.7 Lakh Crore in One Day reduced the value of their holdings. For financiers, the lower loan-to-value ratio meant less security for loans. This reduced their margin of safety.
The fall in gold prices primarily affected the household in India. Many families invest in gold for household savings. The Gold price drop wipe off ₹10.7 Lakh Crore in One Day reduced their savings significantly. Indian households and temples hold over 30,000 tonnes of gold. This is one of the largest gold reserves in the world.
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Beneficiaries of the Move
Organized jewelry players benefited from the duty cut. The reduction in duty was a long-standing demand. It is expected to reduce smuggling which is positive for the exchequer. Lower smuggling means better revenues for the government.
Before the budget announcement, the price of gold was ₹72,875 per 10 grams. After the announcement, it dropped to ₹69,270 per 10 grams. This Gold price drop wipe off ₹10.7 Lakh Crore in One Day.
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