Jewellers in India plan to shut shops for two more days, continuing their protest against the duty increase on gold imports, resulting in a potential loss of Rs 1,500 crore.
The government for the second time in 2012 doubled import tax on gold bars to 4% on value, revising the cost upwards by up to Rs 1,040 per 10 grams.
The government also intends to charge 2% on jewellery purchases more than 200,000 rupees along with an excise of 1% on non-branded jewellery. Gold imports have been blamed for the country's widening current account deficit.
"They are doing the wrong thing as middle class won't be able to afford such exorbitant rates ... We will have to compromise on the quantity that we intend to buy," said Alifiya Husain Jawadwala, a 28-year-old, who wanted to buy a ring for her brother's marriage at Mumbai's famed Zaveri Bazaar, which houses more than 50,000 traders, jewellers and dealers.
The jewellery market wore a deserted look on Monday, its third day of strike, with placards making appeals to "support the bandh (strike)".
The strike, which started on Saturday, has been extended till March 21 due to extensive pressure from jewellers across the country.
Even traders abstained from making new purchases in the middle of the peak wedding season in India, the world's biggest bullion market.
"Demand is totally out today due to the strike, I haven't had any deals since morning," said Pinakin Vyas, assistant vice-president with IndusInd Bank, a large gold importer.
Industry participants said the increased arbitrage could result in gold coming through unofficial means in the country and could cost banks its business.
"Banks will lose as smuggled goods will be cheaper compared to bank rates... Banks may go out of business in another six months," said Kumar Jain, vice-president of the Mumbai Jewellers' Association.
Finance Minister Pranab Mukherjee has refused to waive off any of the duties.
India, which does not own any gold mine, imports 900 tonnes of the yellow metal annually.
Higher gold imports meant the country spent more US dollars, increasing the total import bill and widening the current account deficit.
Gold imports alone contributed nearly 40 basis points in the 130 basis points widening of India's current account deficit between fiscal year 2008 and fiscal year 2011, research house Macquarie said in late November.