Government Mulls Steps to Reduce Gold Imports

January 2, 2013 at 08:12

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The government is considering steps to reduce gold import by making it more expensive, Finance Minister P. Chidambaram said on Wednesday.

“Demand for gold must be moderated… We may be left with no choice but to make it more expensive to import gold. The matter is under government consideration,” he told reporters in New Delhi.

Gold import is a major constituent of India’s rising Current Account Deficit (CAD). The CAD widened to a record high of 5.4 per cent of GDP, or $ 22.3 billion, in the July-September quarter.

In value terms, gold imports stood at $ 20.2 billion in the April-September period of the current fiscal, a decline of 30.3 per cent over the corresponding period a year ago.

For the entire 2011-12 fiscal, gold imports stood at $ 56.2 billion.

The decline was mainly on account of increase in customs duty on gold imports by government in January and March 2012.

In his Budget proposal, the then Finance Minister Pranab Mukherjee had doubled the basic customs duty on standard gold bars to four per cent and on non-standard gold to 10 per cent.

He also imposed one per cent excise duty on unbranded jewellery, which was subsequently rolled back after protest from jewellers across the country.

Currently, the government is also making efforts to channelise investor money into equities and other financial instruments to reduce demand for the yellow metal.

The CAD had risen to 4.2 per cent of GDP in the 2011-12 fiscal on account of high gold import and increasing prices of crude oil in international markets.