Commerce and Industry Minister Suresh Prabhu Friday said he has taken up with the finance ministry the issue concerning credit to the gems and jewellery sector to ensure adequate availability of funds for them.
Prabhu also said the ministries are looking at the industry's demand of cutting import duty on gold to 4 per cent from the current 10 per cent.
The industry also wants a reduction in the duty on diamond to 2.5 per cent from 7.5 per cent.
"This is one of the important issues...for the industry that is export-oriented... If you have import duties, the working capital gets blocked up. So, we are already working on that.
"At the same time, the Ministry of Finance has a responsibility to curtail CAD (current account deficit), therefore they are also trying to find out how we can keep the imports under control. So, we have to balance both together," the minister told reporters here.
On financing issues of the sector, Prabhu said meetings were held with bankers to address the matter as the genuine needs of the industry should be looked at.
"I have again taken up the issue with the finance ministry and we will make sure that the industry is not starved of necessary finances," he added.
The gems and jewelery sector, especially the diamond industry, is facing credit crunch as banks have tightened their hands following the Rs 14,000-crore Nirav Modi scam in Punjab National Bank.
The minister also stated that the government would soon come out with a gold policy and set up a domestic gold council to promote the growth of the sector.
The country's annual gems and jewelery exports stand at about USD 40 billion. The sector, which contributes 13.5 per cent to India's total merchandise exports, employs about five million people. It also accounts for 7 per cent of the country's gross domestic product (GDP).
Commerce Secretary Anup Wadhawan said various stakeholders are being consulted on formulation of the policy and setting up of the council.
"I hope to reach a logical outcome very soon," he said.
The secretary also asked the industry for self regulation, so that rules and regulations could not be violated.
Further, he said the industry needs to look at innovative ideas to exploit India's huge gold reserves to contain imports.
India imports about 1,000 tonne of gold every year. The imports, which have a bearing on CAD, increased by 22.31 per cent to USD 33.65 billion in 2017-18.
The country is the largest importer of gold, which mainly caters to the demand of the jewellery industry.
CAD, the difference between outflow and inflow of foreign exchange, widened to 2.4 per cent of the GDP in the first quarter of 2018-19.
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