Amid pressure to relax restrictions on import of gold, the government may revisit some of the curbs by March-end, said Finance Minister P. Chidambaram here on Monday.
He said it would happen if the government gets a grip over the current account deficit (CAD) situation.
“I am confident that by the end of this [financial] year we will be able to revisit some of the restrictions on gold import but we will do so only when we are absolutely sure that we have a firm grip on the CAD,” he said addressing tax officials here on the occasion of Customs Day.
These remarks come soon after UPA chairperson Sonia Gandhi’s letter last week to the Commerce Ministry seeking appropriate action on the demands of gems and jewellery exporters to reduce import duty and relax 80:20 rule for import of the metal, which is the second biggest component in the import bill after crude oil.
In his address on Monday, the Finance Minister admitted that the curbs had led to an increase in gold smuggling into the country. He, however, said that these were necessary to contain the CAD, which touched a record high of $88.2 billion in 2012-13.
Mr. Chidambaram said there had been about 1-3 tonnes of gold smuggled into the country every month following the restrictions imposed on shipment last year. “I know gold smuggling has increased ... But the restrictions on gold import were absolutely necessary because it is these restrictions which have brought down gold import which in April and May had crossed 300 tonnes. If we had not imposed restrictions, there was no way we could have managed balance of payments or the CAD,” he said.
He also said the long-term way to control CAD was not to indulge in policy repression by restraining the imports of gold, but to increase exports.
The CAD in the current fiscal is expected to soften significantly to $50 billion.
Gold imports, which peaked to 162 tonnes in May, came down to 19.3 tonnes in November after the government hiked import duty thrice in 2013, taking it to 10 per cent. Besides, the Reserve Bank has also linked imports of the precious metal to exports amid a widening CAD and depreciation of the rupee.
The CAD in the first half (April-September) of current fiscal narrowed to $26.9 billion from $37.9 billion in the first half of 2012-13.
