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The Globe and Mail

Import tax hike unlikely to dampen India's passion for gold

Despite a hike in import taxes to rein in a ballooning fiscal deficit, analysts say Indians will continue to turn to gold as an inflation and currency hedge. The country is the world's top importer of the precious metal.

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A goldsmith works on a gold bangle at a workshop in Kolkata in this file photo. India’s passion for gold is putting such a strain on state finances that the government has raised the import tax from 4 per cent to 6 per cent.

RUPAK DE CHOWDHURI/REUTERS

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People watch the unveiling of a Tata Nano car made of gold during a ceremony in Mumbai Sept. 19, 2011. About 80 kilograms of 22-karat gold, approximately 15 kilograms of silver and gemstones decorate the car.

DANISH SIDDIQUI/REUTERS

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Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh May 8, 2012. The duty hike was coupled with a government appeal to consumers to reduce purchases.

AJAY VERMA/REUTERS

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A customer tries gold bangles inside a jewellery showroom at Noida in the northern Indian state of Uttar Pradesh in this file photo. India vies with China as top global consumer of gold, and with nearly all demand covered by imports, the country’s purchases are a major factor in global prices.

PARIVARTAN SHARMA/REUTERS

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A worker shows a melted mixture of gold and silver at a gold refining workshop in Mumbai Sept. 4, 2012. A booming recycling trade accounts for up to half of India’s consumption.

DANISH SIDDIQUI/REUTERS

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A goldsmith works on a gold bangle at a workshop in Kolkata Jan. 16, 2013.

RUPAK DE CHOWDHURI/REUTERS

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A goldsmith checks a gold necklace at a workshop in Kolkata. Indians buy gold to hedge against inflation and currency risks as well as for jewellery.

RUPAK DE CHOWDHURI/REUTERS

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Unfinished gold bangles are pictured hanging on a gas burner inside a workshop in Kolkata Jan. 16, 2013.

RUPAK DE CHOWDHURI/REUTERS

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A goldsmith works on gold ornaments in Kolkata. Demand for gold in India has declined only modestly so far following a 13-per-cent rise in domestic gold prices last year and some higher taxes.

RUPAK DE CHOWDHURI/REUTERS

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A goldsmith holds finished gold bangles.

RUPAK DE CHOWDHURI/REUTERS

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Customers look at gold bangles inside a jewellery shop in the southern Indian city of Hyderabad in this file photo.

KRISHNENDU HALDER/REUTERS

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A woman buyer looks at gold bangles at a jewellery shop in Mumbai in this file photo. Industry analyst fear the increase in the import tax could spur smuggling.

ARKO DATTA/REUTERS

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A salesman adjusts gold bangles inside a jewellery shop in the southern Indian city of Chennai in this file photo.

BABU/REUTERS

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