NEW DELHI(BullionStreet): Justifying government's concerns over climbing gold imports, India's fiscal deficit widened to Rs.4.07 lakh crore (around $76 billion) in the first three quarters of the current financial year.

The deficit during April-December period is almost 79 percent of the budgetary estimate of Rs.5.14 lakh crore for the entire financial year ending March 31, 2013.

As the government struggles to rein in a raging current account deficit that is likely to cross 4% of the national economic output this fiscal, it has increased the import duty on the precious metal thrice since last year.

India’s gold imports, next only to oil imports in terms of value, were responsible for a current account deficit of 4.2% of the gross domestic product in 2011-12, a 30-year high.

The increase in import duty on gold has clearly led to a price differential between Indian and international gold, and that, in turn, has led to an increase in smuggling.

On 22 January, India raised the import duty on gold to 6% from 4%.

After restrictions were lifted on gold imports and a few commercial banks were allowed to import gold and sell the yellow metal to jewellers and exporters in 1997, the spread between international and local market prices shrank dramatically, but with the rise in import duty, it is now widening.

India is the world's largest importer of gold and biggest consumer of gold jewellery.