The government wants to discourage gold buying as the precious metal is the biggest contributor to the import bill after crude oil and is easier to tame than energy supplies. Analysts said the move will curb speculative demand in gold and will lead to the appreciation of rupee.
The rupee climbed to a near 3-month high in trade on Tuesday. Meanwhile, shares in jewellery makers like Titan Industries and Gitanjali Germs traded with over 2 per cent losses on Tuesday. Most other big jewellery retailers saw selling pressure in a flat market today.
Finance Minister P Chidambaram had earlier said he was considering reining in imports of gold, used as an investment tool by Indians but which mean a drain on foreign currency reserves.
The government had doubled the import duty on gold to 4 per cent in March last year.
Recently, the Reserve Bank of India executive Director Deepak Mohanty urged investors to shift from physical gold as a hedge against rising prices to financial products like inflation-linked bonds.
India's gold imports rose 9 per cent to 223.1 tonnes in the September quarter, after a 56 per cent fall in the June quarter to 131 tonnes. Analysts predict a recovery in the December quarter due to peak festival- and wedding-season buying.
(With inputs from Reuters)