cnbc.com / By Ansuya Harjani / Tuesday, 22 Jan 2013 | 3:59 AM ET
Prashant Tejnani, owner of a jewelry store in India’s financial capital Mumbai, said news of the government’s latest tax hike on gold imports sent an initial wave of panic through vendors in the city’s bustling Zaveri Bazaar, or jewelry market – but he expects the impact on demand to be fleeting.
“Gold will always retain its shine in India. An increment of 2 percent will curb demand initially, for one or two months, but once people get used to it, they won’t mind paying the extra,” Tejnani, whose family has been in the jewelry business for 50 years, told CNBC on Tuesday.
Gold is India’s second largest import after oil and has led to an increase in the country’s current account deficit which stood at 5.4 percent of gross domestic product in the July-September quarter. This insatiable appetite for gold led the government to increase the tax on its import to 6 percent, from an earlier 4 percent, on Monday.