No new measures on cards, says Rajan

The Government’s recent measures to curb gold imports have started showing results, with the demand for foreign exchange for gold purchase going down significantly in the past five-seven days, Arvind Mayaram, Economic Affairs Secretary, said here on Tuesday.

“It (the demand for foreign exchange for gold purchase) has come down from a peak of $227 million to $7 million in a particular day. The average has been $41 million,” Mayaram said.

“Steps….taken on gold. They have started showing results,” he added.

RECENT STEPS

Spiralling gold imports this fiscal had added pressure to the widening current account deficit, which is estimated to have touched five per cent of gross domestic product as on March 2013.

To tackle this situation, the Centre had on June 5 hiked import duty on gold to eight per cent, from six per cent earlier.

On its part, the Reserve Bank of India extended certain existing restrictions on gold imports by banks to nominated agencies and premier trading houses.

The central bank had stipulated that gold imports on consignment basis by banks and nominated agencies shall be permissible only to meet the needs of exporters of gold jewellery.

The RBI had also stipulated that all letters of credit to be opened by nominated banks/agencies for import of gold under all categories will be only on 100 per cent cash margin basis.

It appears all these steps seem to have cumulatively helped moderate demand for foreign exchange to buy gold.

NO NEW MEASURES

Meanwhile, Raghuram Rajan, Chief Economic Advisor to the Finance Ministry, said he expected a significant drop in gold imports in June, mainly due to the joint efforts of the Government and RBI.

“We are not contemplating any additional restrictive measures on gold and there is no reason for speculating on this basis,” Rajan said here on Tuesday.

He said gold imports for the first 13 business days, till May 20, averaged $135 million a day. However, in the 14 subsequent days till Friday of last week, the average was only $36 million.

India’s gold import bill in the first two months of the current fiscal was earlier estimated at $15 billion. It was about $7.5 billion in April.

The average quantum of monthly gold imports so far this fiscal was 150 tonnes. This is almost double the monthly average of about 70 tonnes last fiscal.

srivats.kr@thehindu.co.in

(This article was published on June 11, 2013)
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