February 7: The Government of India has increased the customs duty on gold import through the budget for the fiscal year 2023/24. India’s Finance Minister Nirmala Sitharaman has increased the customs duty on gold imports to 12 and a half per cent.

Experts said that since Nepal and India have open border and uninterrupted trade, as soon as the price of gold increases in the Indian market, it will automatically affect the Nepali market. On the other hand, Nepal's northern neighbour, China, has been imposing minimal rate of tax on gold.

Businessmen said that the possibility of exporting gold from China to India via Nepal cannot be ruled out. However, since China closed its borders with Nepal after the Covid, the possibility of Chinese gold being delivered to India through transit in Nepal is very unlikely. Apart from this, it is said that the possibility of bringing gold from other countries illegally to Nepal and bringing it to India will also increase.

“The government should control it through its security and inspection mechanism," said Manikaratna Shakya, president of the Federation of Nepal Gold and Silver Dealers Association. He said that the Nepali market can also be affected by such activities.

Nepal imports gold from Dubai, Turkey, Hong Kong and Australia. However, businessmen cannot import gold in Nepal. Banks import gold in Nepal as per the provisions of Nepal Rastra Bank, while Businesses buy from banks.

Traders said that with the Indian government increasing the customs duty on gold import, the price of gold in the Nepali market will be cheaper by Rs 1000 to 1500 per tola compared to India. According to the Federation’s President Shakya, Indian customers can come to the border towns of Nepal to buy gold.

“There is a possibility that Indian customers will come to the Nepali market and buy gold. It is good if this happens. Nepali business will grow, and many will get jobs,” he said.

The government of Nepal has adopted a policy of sending only 10 kg of gold per day to the market for trading. Due to the impact on international economic activities after the Russia-Ukraine war, as the foreign currency reserves are decreasing in Nepal, the government has reduced the amount of gold to be sent to the market to 10 kg to reduce the outflow of dollars. Businessmen are demanding to increase in the amount saying that 10 kg of gold will be less during the peak season.

"10 kg of gold is less. The government needs to send at least 20 or 25 kg of gold to the market daily,'' Pawan Kumar Somani, the vice president of the federation, said. He said that there is no alternative to increasing the amount of gold to keep the market moving.

However, because after India increased the tax on gold import, the price of gold in Nepal decreased, increasing the amount of gold in the market may create a situation where the gold will have to be bought in dollars and sold in gold. If this happens, there will be a situation where the demand of businessmen, who have been taking a stand for increasing the supply of gold for a long time, will not be met.