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FinMin likely to get tougher on gold imports

04 Jun 2013 Evaluate

The government is expected to review the export import policy on gold, mainly on the backdrop of surge in imports of precious metals by more than 150% in April. With the gold imports rising steadily, the finance ministry is likely to get tough on gold imports mainly to rein the current account deficit (CAD) with measures including banning sale of gold coins by banks and reviewing the gold import export policy.

Finance Minister P Chidambaram has said that India cannot afford high levels of gold imports and may review its import policy. Recently, the government hiked its import duty to 6% in January in an attempt to limit purchases and rein in a record high CAD. Gold is the second biggest import item after crude oil.

Similarly, the RBI last month had imposed curbs on import of the yellow metal by banks. Besides, it has also put restrictions on banks and NBFCs for providing loans against gold coins as well as units of gold ETFs.

Gold and silver imports for the month of April surged by 138% to $7.5 billion against $3.1 billion in the year-ago period. Due to high gold imports, the country's trade deficit in April widened to $17.8 billion year on year. Further, higher trade deficit in turn adds pressure on CAD, which has been described as the biggest risk to the Indian economy by the apex bank - RBI.

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