India May Re-impose Gold Curbs

Arun Jaitley
Arun Jaitley

New Delhi: The government would look at reimposing curbs on gold imports after Diwali as there has been a five-fold jump in inward shipments of the precious metal, which has pushed the trade deficit to an 18-month high, reports Business Today.

“Let the festival season be over. I will have a look at it. I don’t want to spoil the festival season,” Union finance minister Aurn Jaitley said on Monday in reply to a question on whether the government will bring back the earlier restrictions on gold imports.

The government and Reserve Bank of India (RBI) had imposed a slew of restrictions on gold imports as the current account deficit (CAD) widened to a record high of 4.8 per cent of gross domestic product (GDP) in 2012-13 and the rupee had turned weak and unstable consequently.

The government had introduced the 80:20 rule, which required major gold importers in the jewellery sector to export, at least, 20 per cent of their gold imports. Apart from this, only select banks were allowed to import gold, which amounted to a physical restriction apart from the high customs duty.

The physical restrictions were removed once CAD came down and the rupee stabilised. But now with the trade deficit shooting up, the revenue department is of the view that there is a need to reimpose the earlier restrictions.

The government had increased customs duty on gold to 10 per cent and banned import of gold coins and medallions while RBI linked imports of the metal to exports. However, RBI has started easing some of the curbs and allowed more nominated agencies to import the yellow metal.

Gold imports jumped to $3.75 billion in September on account of the ongoing festive season. Imports stood at $682.5 million in the same month last year. Higher imports pushed up CAD to about 18-month high of $14.2 billion last month.

On extension of excise duty sops for the auto sector expiring in December, Jaitley said that the government would take a view at the right time.