Indian Govt in no rush to lower gold import duties, says FM sources

Author: Paul Ploumis17 Jul 2014 Last updated at 08:15:33 GMT

NEW DELHI (Scrap Monster): The sources from Indian Finance Ministry stated that the Union Government is in no hurry to soften the high gold import duties. Any decision on lowering the duty structure would be taken only upon monitoring the July trade data which is scheduled to be released by mid-August. This essentially means that the high import duties on gold will stay for some more time.

The trade data released yesterday for the month of June ’14 indicates that gold imports have spiked up during the month. The tight curbs imposed by the previous government and the Reserve Bank of India (RBI) restricted gold imports during the past seven consecutive months. However, the government’s decision to allow more banks and trading houses to import the yellow metal has resulted in higher gold imports. The June ’14 gold imports have surged 65% year-on-year to $3.12 billion. The unprecedented rise in gold imports have sent the country’s trade deficit to 11-month high.

According to Finance Ministry sources, the gold industry in the country had long been demanding removal of curbs on gold import. However, the high trade deficit data gives no more room for the government to implement any relaxation in gold import norms.

In 2013, India had raised the gold import duty from 2% to 10%. Also the RBI had imposed the 80:20 rule which tied gold imports to percentage of exports. Consequent to these measures, gold flow into the country had declined sharply. The low gold imports had helped to lower the Current Account Deficit (CAD). But the strong rebound in gold imports during June ’14 may force the government to rethink on loosening gold import norms.