The commerce ministry’s data showed that imports of gold inched up by 3.95% to $17.63 billion in the first half of fiscal year 2018-19 (H1FY19) as compared to imports of $16.96 billion in April-September period of financial year 2017-18. This in turn led to increase in the country's trade deficit and enhancing worries about the current account deficit (CAD).
After recording a negative growth in imports till June this year, gold imports started registering double digit growth. In August it increased by 51.5% to $2.6 billion. India is the largest importer of gold, which mainly caters to the demand of the jewellery industry. In volume terms, the country imports 800-900 tonnes of gold annually. To mitigate the negative impact of gold imports on trade deficit and CAD, the government took certain measures to cut the inbound shipments of the yellow metal.
Those measures include imposition of restriction on duty free gold imports from the South Korea as allowed under the existing India-Korea free-trade agreement, and imposition of self-use condition on Premiere Trading House/Star Trading House authorised to import the precious metal (gold) directly from overseas bullion supplier. The government has also raised import duties on certain products such as some communication equipment to contain the CAD.
Increase in gold imports, resulted in higher the country's trade deficit at $94.32 billion in April-September 2018-19 as against $76.66 billion in the same period last year. CAD, which is the difference between outflow and inflow of foreign exchange, also widened to 2.4% of the Gross Domestic Product (GDP) in the first quarter of 2018-19.
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