India's passion for gold is putting such a strain on state finances that the government may slap higher import taxes on the precious metal, but demand buoyed by heady inflation and meagre savings will blunt the impact of any rise in duties.
Initial success from a tax hike in March last year was stifled by the arrival of major festivals such as Diwali, when gold is a must-give present, and the winter wedding season.
That has scuppered New Delhi's goal of reining in spending on gold by around a third to $38 billion in the fiscal year that ends in March, prompting Finance Minister P. Chidambaram to say another tax increase could be on the cards.
But market participants say that would do little to dull gold's lustre for most Indians, especially with bullion prices heading north.
And the finance ministry would ideally like imports to be around $30 billion, an economic adviser there has told Reuters, with industry experts dismissing this as little more than wishful thinking.
India is challenged only by China in its appetite for gold, and with nearly all demand covered by imports, the country's purchases are a major factor in global prices.
The latest figures show the volume of imports jumped 48 percent in July-September from the quarter before and were only 8 percent down on 2011.
"It is the disease that needs to be cured rather than the symptom," said Munish Dayal, a partner at Baring Private Equity Partners India Limited.
With inflation above 7 percent and India's central bank keeping key rates at 8 percent, it's no wonder that a 13 percent rise in domestic gold prices in 2012 looked attractive to so many.
David Fuller's view Today, people buy and sell gold for all
sorts of reasons, including relative performance and momentum.
However, for centuries people have favoured gold as a store of wealth, whether or not it was actually used as money at the time, mainly because it has the best record for holding its value over the longer term of any asset, let alone against fiat currencies.
For this reason Fullermoney has often described gold as hard money. People in India and anywhere else where they understand the history of money know that when paper currencies are not pegged to gold, they have always lost purchasing power over time.
Without a gold standard, every country is free to print its currency at will. Just ask Mr Bernanke. I would be surprised if any country returned to a gold standard because its currency would appreciate against all the others.
Meanwhile, an environment of low real interest rates and competitive devaluations, including quantitative easing (QE) by leading central banks, ensures that occasional talk of a gold bubble at today's prices (weekly & daily) is disingenuous nonsense.