Sonia effect? FinMin may rethink gold import curbs by March end

Our Bureau New Delhi | Updated on November 23, 2017 Published on January 27, 2014

CAD worries Finance Minister P. Chidambaram with Finance Secretary Sumit Bose and Chairperson of Central Board of Excise and Customs Praveen Mahajan at the International Customs Day in the Capital on Monday. - Ramesh Sharma

But revisit hinges on firm grip on current account deficit, says Chidambaram

Sending a signal ahead of the general elections, Finance Minister P. Chidambaram has hinted that the Government may by end-March revisit the existing restrictions on bullion imports.

Even as he maintained that a review depended on the Government getting a firm grip over the current account deficit (CAD), the willingness to revisit the restrictions came as some good news to the jewellery trade.

The jewellery trade had called for the removal of the bullion import curbs.

Sonia letter

The Finance Minister’s remarks are significant as they came close on the heels of National Advisory Council Chairperson Sonia Gandhi’s office writing to the Commerce Ministry asking for a review gold import curbs.

“I am confident that by the end of the year, we will be able to revisit some of the restrictions on gold imports. “But let me hasten to add we will do so only when we are absolutely sure that we have a firm grip on CAD,” Chidambaram said at an event to mark the international customs day.

Export push

Chidambaram also said that the long-term solution for controlling CAD was not to indulge in policy repression by restraining the imports of gold, but to increase exports.

Finance Secretary Sumit Bose later confirmed at the same event that the Minister was referring to the financial year ended March 31.

Besides progressively increasing the Customs duty on gold imports from 2 per cent to 10 per cent, the Centre had also stipulated that 20 per cent of bullion imports be set aside for re-exports as jewellery.

Increased smuggling

Chidambaram admitted that the clampdown on gold imports had spurred smuggling and between 1-3 tonnes of gold were being illegally brought in every month.

“It is likely that 1-3 tonnes of gold are smuggled every month. But the restrictions on gold imports were absolutely necessary.

“If we had not imposed restrictions, there was no way we could have managed the balance of payment situation.”

Policymakers expect the CAD situation to improve to around $45 billion in 2013-14, much lower than the earlier estimated $70 billion.

This is substantially lower than the actual record CAD of $87.8 billion last fiscal. Thanks to curbs on gold imports, the country's bullion imports came down from 300 tonnes in April-May to a level of 45 tonnes in October-November, bringing some relief to policymakers.

Published on January 27, 2014
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