Author: Paul Ploumis
27 Feb 2015 Last updated at 07:27:06 GMT
MUMBAI (Scrap Monster): The Economic Survey Report 2014-'15 tabled today in the Parliament says that the country’s current trade balance situation signals that time is ripe for removal of existing gold import restrictions. The Survey notes that the growth in oil imports have become thin, whereas the gold and silver imports into the country has registered negative growth during the period.

According to the Survey Report, the country’s trade deficit dropped from $190.3 billion during 2012-'13 to $135.8 billion during 2013-'14. The growth in imports declined sharply during this period. The oil imports by the country reported lower growth rate of 0.4%, whereas gold and silver imports played key role in taming the rising CAD situation in the country. However, export growth remained sluggish at 4.7%.

In an attempt to check the rising CAD which touched record high of $88 billion in 2012-'13, the Indian government had raised the gold import duty from 2% to 10%. The Reserve Bank of India RBI) had imposed several restrictions on gold imports including 80:20 rule which required importers to re-export one-fifth of all gold imports. Consequent to tough import rules, gold smuggling had become rampant in the country. The gold smuggling incidents rose significantly from 869 in 2012-'13 to as high as 2,441 in 2013-'14.

Earlier during November last year, RBI had scrapped the controversial 80:20 rule, thereby easing supply chains of the precious metal. As a result, gold smuggling instances have gone down significantly. Also, demand for gold in the country has declined sharply. With CAD levels under control, this is the ideal time to lift gold import restrictions, the Survey noted. As per data, the country’s CAD level dropped to $32.4 billion during 2013-'14.