Author: Paul Ploumis
20 Oct 2014 Last updated at 08:09:10 GMT
NEW DELHI (Scrap Monster): The Indian Finance Ministry has called for re-imposition of the gold import curbs which were earlier relaxed on May 21st this year. The Revenue Department under the Finance Ministry has asked the Department of Economic Affairs (DEA) and the Reserve Bank of India (RBI) to review the relaxations. Incidentally, India’s Trade Deficit had doubled during September, on account of sharp rise in gold and silver imports.
Under the 80:20 rule imposed by the RBI, the nominated agencies were allowed to import gold only upon satisfying the condition that 20% of the previously imported gold has been exported out of the country. During May this year, some relaxations were allowed, thereby permitting more entities to import gold. Star and premier export houses were allowed to import gold.
The Finance Ministry expressed deep concerns on spiraling gold and silver imports. As per data, gold imports during Sep ’14 zoomed by over 450% to $3.75 billion. Silver imports too surged by 225% to $477 million. The combined import bill for gold and silver during the month totaled $4.23 billion, registering five-fold increase upon comparison with the net import bill of $830 million during September last year.
Gold imports more than doubled to 9 tonnes in September when compared with 3.38 tonnes imported in August. The Silver imports increased from 218 tonnes in Sep ’13 to 690 tonnes during last month.
The Ministry notes that relaxation of the gold import norms led to increased gold intake by trading houses and other nominated agencies, leveraging on the low gold prices. It believes that unless the restrictions are put back in place, the country’s trade deficit is likely to surge even higher in the upcoming months as gold demand is expected to remain robust due to ongoing festive and wedding season demand.