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India likely to curb gold import
Publication Date : 03-01-2013
Disturbed over the current excessive demand for gold that has led to mounting import of the precious metal and consequently to swelling current account deficit (CAD), the Indian government has said it is mulling measures to make its import dearer.
“Demand for gold must be moderated...We may be left with no choice but to make it a little more expensive to import gold. The matter is under government consideration,” Union finance minister P Chidambaram told reporters.
The CAD--the difference between exports and imports after considering cash remittances and payment--has widened to US$38.7 billion or 4.6 per cent of the GDP during the first half of the current fiscal, he said. This was mainly contributed by gold imports which amounted to $20.25 billion.
Had the gold imports been half of the actual level, the country’s foreign exchange reserves would have increased by $10.5 billion as against the marginal accretion of $0.4 billion during April-September, he said.
The country cannot afford to spend so much on importing gold, he added.
“Nobody says gold within the country should not be used for whatever purpose. There is enough gold within the country. But import of gold is a huge strain on the current account,” he said.
During the fiscal year 2011-12, gold imports stood at $56.2 billion. On reports of smuggling of gold, Chidambaram said it is mostly speculative. “May be some smuggling has taken place but whatever level of duty, there is always smuggling,” he said.
In order to curb demand for gold, the then finance minister, Pranab Mukherjee, in his Budget last year had doubled the basic Customs duty on standard gold bars to four per cent and on non-standard gold to 10 per cent. There has been moderation of gold imports as a result of government policies during the first half of the current fiscal.
In value terms, gold imports at $20.2 billion in April-September reflect a decline of 30.3 per cent over the corresponding period a year ago.
The decline can partly be attributed to increase in Customs duty on gold imports by the government in January and March 2012. As more is needed to be done, Chidambaram appealed to the people to “moderate demand for gold which leads to its large imports”.
Traditionally, India has been the world’s largest consumer and importer of gold. The price of gold in the national capital on Tuesday rose by 155 to 31,145 rupees to per 10 gm, while silver became expensive by 740 to 57,740 rupees per kg.
The main contributors to the widening of CAD, Chidambaram said, were declining exports which slipped by 7.4 per cent during the first half of the current financial year and rising imports which went up by 4.3 per cent in the same period.