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While more measures are being contemplated to curb import of gold, the ministry of commerce and industry is not in favour of any further restrictions. It believes such a move will further “encourage smuggling”, according to commerce and industry minister Anand Sharma.
“The measures taken are pretty adequate, as of now. The government is keeping a watchful eye, so there is no need for more measures now. If you do too much, it will to lead to problems like smuggling. So, any further restriction will be counter-productive,” Sharma told Business Standard, adding that government agencies such as MMTC and other state public sector undertakings are making sure that gold reaches the actual users. He added the finance ministry was looking at introducing a scheme in the next few months to help consumers “convert gold into paper”, indicating work on an investment tool more attractive than investing in gold.
A senior official in the department of commerce said the increase in duties had already given rise to smuggling and, so, any further increase would be “unmanageable”. The department is believed to have communicated this to the finance ministry, that is does not want any more increase in the import duty.
The official said gold import in July might reach 65 tonnes, up from 31 tonnes in June. The government is yet to release the trade data for July.
Last week, chief economic advisor Raghuram Rajan said the finance ministry was working on creating more attractive instruments as an alternative source of investment to gold. In value terms, gold imports reached $2.45 billion in June from $8.40 billion in May and $2.45 billion in April, according to data from the ministry of commerce and industry. In quantity terms, gold imports were 141 tonnes in April and rose to 162 tonnes in May; in June, it came down to 31 tonnes. The figure for all of 2012-13 was 845 tonnes, at $50 billion.
Earlier, finance minister P Chidambaram had said imports in July had surged compared to June; therefore, the measures to restrict gold import “will continue".
“Comparing gold imports on a monthly basis is not correct analysis. We must see the outcome of the measures taken in the months to come. With eight per cent duty, imports have already come down substantially,” said Ajay Sahai of the Federation of Indian Export Organisations. In the past year, the government has adopted a series of measures to rein in gold imports, to contain the widening current account deficit (CAD), the difference between the country's total imports of goods, services and transfers and their exports, which touched a record high of 4.8 per cent of gross domestic product in 2012-13. It first raised the import duty from two per cent to six per cent to curtail demand; then, in June, this was raised to eight per cent. The Reserve Bank also tightened the norms for exporters. The government has also stopped trading of gold in special economic zones.
