WEST BENGAL-Twisted Economics

relative prices have thus gone to stimulate absorption of gold and silver in the Indian market. It was hoped that liberalisation of import of gold and silver would minimise smuggling, prevent diversion of foreign exchange into illegal channels and wipe out the 'havala' rupee rate for the dollar. Nothing of the sort has happened. The 'havala' rate is currently Rs 35.50 per dollar for dollar instruments and Rs 33.50 per dollar for cash. Even the hope of collecting some revenue from the import of the precious metals has not been realised. Initially, the import duty on gold was put at Rs 450 per 10 gm (or about 10 per cent of the ruling market price in India), but it had soon to be reduced to Rs 220 per 10 gm. The duty on silver is Rs 500 per kg (roughly 6 to 7 per cent). The bullion trade had been putting tremendous pressure on the Maharashtra government to reduce the sales tax on bullion on the ground that other states had lower rates. Conceding the demand, the overall incidence of state levies (including 0.3 per cent surcharge for the earthquake relief fund) has now been slashed from 3.75 per cent to just 0.8 per cent.