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India, the world’s biggest consumer of bullion, increased import duties on gold and silver, potentially cooling demand from jewellery buyers and investors, according to GulfNews.com.

The government began taxing gold bars and coins at an additional 2 per cent from this week, while silver attracts a 6 per cent levy, the report said, quoting India’s finance ministry’s website. Overseas purchases of gold were taxed at Rs300 (USD$5.71) per 10 grams and of silver at Rs1,500 a kilogram before yesterday.

Gold imports were already poised to drop 48 per cent in the first quarter as a decline in the rupee boosted prices and high borrowing costs cooled demand, Prithviraj Kothari, president of the Bombay Bullion Association, said on January 3. The higher taxes may help Prime Minister Manmohan Singh cut the fiscal deficit as slowing growth threatens to erode revenue.

“The government increased the duty probably to collect more revenue,” said Kothari by phone. “Prices will rise in the domestic market.”

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