Tuesday, March 5th 03:02 PM IST

Inflation concerns boost Gold buying in India : RBI

# India gold reserves  # import tariff value  # gold imports  

World's No 1 gold consumer India recently announced several measures to discourage people from buying gold and prodding them to invest in financial instruments.

NEW DELHI(BullionStreet): Days after Indian finance minister Chidambarm urged people not to buy so much of gold, RBI chief said high inflation was forcing people to indulge in buying gold.

According to India's central bank, Reserve Bank of India Governor Duvvuri Subbarao it is the high inflation rate that forcing people to indulge in buying gold rather than depositing funds with banks.

World's No 1 gold consumer India recently announced several measures to discourage people from buying gold and prodding them to invest in financial instruments.

Earlier last week, Finance Minister P. Chidambaram appealed to people not to buy so much gold as a way of reducing hefty imports.

The minister however didn't raise gold import duty, as widely expected, in his budget presented on February 28.

Traders had expected a rise in duty to 8 percent in the budget after a 50 percent hike on January 21 from 4 percent was neutralised by falling global prices.

Raising duty too much risks encouraging illegal imports of gold but Chidambaram said he did not think taxes were high enough for that yet.

Gold is second only to essential crude oil in the import bill of Asia's third-largest economy, with coal and edible oils also costly items.

Chidambaram said ways to tackle the current account deficit, which hit 5.4 percent of gross domestic product (GDP) in the July to September quarter, were by encouraging domestic production and boosting export

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