Photo by: Bloomberg
KOLKATA (miningweekly.com) - India is unlikely to ease import restrictions on gold as a surge in inward shipments has taken the sheen off the country’s international trade performance.
According to data released by the government on Wednesday, Indian exports during June were recorded at $26.5-billion, up 10.2% over the previous corresponding period, representing double-digit growth for the second consecutive month.
However, the trade deficit during June spiked to $11.76-billion. Imports rose 8.33% during the month to $38.24-billion with gold imports as the major contributor and negating improved exports performance.
A senior official in the Department of Revenue under the Finance Ministry said that the rising trade deficit was a cause of concern against backdrop of rising global oil prices and a depreciating rupee.
The trade data also significantly reduced the government’s leeway to ease restrictions on gold imports, including the expected reduction in 10% import duty, he said.
After showing a declining trend over the past seven consecutive months, Indian gold imports in June spurted 65% to $3.12-billion, up from $1.88-billion in June 2013.
The figures sparked fresh concerns over gold imports triggering negative macro indicators such as a rising current account deficit (CAD), which the previous Indian government had a difficult but successful time in combating, the official said.
The previous Indian government had imposed quantitative and fiscal (higher import duty) restrictions on the inward shipment of gold to tame the CAD. India’s CAD, or the excess of foreign exchange outflow over inflow, touched an all-time high of 4.8% of gross domestic product in 2012/13.
While the new Indian government, which took charge in May, was perceived to be biased towards gold merchants, even it could not risk the Indian rupee weakening to Rs60 to a US dollar as a result of the higher inflow of gold, a repeat of the last two fiscal periods, the official said.
Soon after taking charge, the government had been considering demands from the All India Gems and Jewellery Association, backed by Commerce Ministry, to prune import duty to 2% to 4%, from 10% at present.
Earlier this year, the Reserve Bank of India eased import norms, permitting select trading houses to import gold for value addition, while earlier only select banks were permitted to import the metal.
In view of the latest data, the government was unlikely to reverse curbs imposed by the previous regime as unleashing India's appetite for bullion would risk the country’s currency and thereby negate its priority inflation busting measures, the official said.
Restrictions had helped in checking bullion (gold and silver) imports, which declined 40% to $33-billion in 2013/14 from $56-billion in the previous fiscal period.