India gold imports touched $60 billion, of which $15-20 billion was due to high inflation as people use the precious metal as a hedge against inflation.
NEW DELHI(BullionStreet): A completed ban on gold imports is not possible in India as it will make way for wide scale gold smuggling, said a top Indian official.
According to C Rangarajan, Chairman of Prime Minister’s Economic Advisory Council (PMEAC), banning gold imports will push up its smuggling and stated that there are already indications that illegal shipments of the precious metal have gone up in the last three months.
“I believe gold imports will come down when inflation goes down,” he added while addressing a function. Rangarajan said he has been told by Revenue Department officials that the seizures of smuggled gold have gone up in the recent past.
India, world's largest gold consumer, imported 969 tons of gold last year. In the same event, Reserve Bank Governor D Subbarao reiterated his concerns over rising gold imports and cited its pressure on current account deficit.
He, however, said, “RBI has not put any new restriction on gold imports. Our announcement to stop lending for gold purchase was a reiteration of decades-old decision.”
Rangarajan said that last year, gold imports touched $60 billion, of which $15-20 billion was due to high inflation as people use the precious metal as a hedge against inflation.
RBI Deputy Governor Subir Gokarn had recently called for dematerilisation of the metal to discourage its physical possession, hoping that this move will trim imports.
Traditionally, India has been the world’s largest consumer and importer of gold. Last year, imports was to the tune of 969 tonnes.
However, doubling of the excise duty to 4 per cent in the last budget and the curbs that RBI imposed on gold loan value (down from 85-90 per cent of the value of jewellery to 60 per cent) and banning banks from funding gold purchase by loan companies have led to drop in imports.
In April-October, imports declined 35 per cent year-on-year and overall imports is set to drop over 17 per cent to 800 tonnes this year.