KOLKATA (miningweekly.com) - Stung by a five-fold rise in gold imports during September, the Indian government has started considering options to tighten inward shipment of the precious metal.
According to a government official, the Commerce Ministry has started consultations with various wings of the government, including the Reserve Bank of India (RBI), to weigh up various options of restricting imports and avoiding risks to macroeconomic indicators.
While increasing the current 10% import duty was under consideration, other measures were also being tabled, as a mere hike of the tariff rate might have unintended negatives impacts, the official said.
The RBI was being consulted on options of further tightening the so-called 80:20 rule which stipulated that gold importers export a minimum of one-fifth of the gold imported into the country.
Gold shipments during September 2014 jumped five times to 95 t valued at $3.75-billion. In the corresponding period of the previous year, imports were pegged at 20 t valued at $682-million, according to data from bullion traders associations.
Higher gold imports pushed up India’s trade deficit to an 18-month high of $14.2-billion in September prompting the government to renew efforts to check shipments.
The Commerce Ministry would have to make a call on whether the sharp spike in imports during the month was an aberration stemming from a fall in international gold prices, combined with festive season demand during September, or whether higher imports were a reversal of the declining trend of the past year, the government official said.
Pointing out the vulnerabilities of macroeconomic indicators, he said that while gold imports were rising, the trend of foreign capital inflow over the past months was downward, the trade deficit was rising, and export growth was stagnating at around 3% since the beginning of the current fiscal year in April 2014.
The government was cautious of increasing the import duty rate higher than 10% in the face of opposition from within government, the official said.
The Department of Revenue Intelligence (DRI), under the Finance Ministry, has in fact called for a lowering of the tariff, holding it responsible for the 300% rise in gold smuggled into the country.
During April to September 2014, the DRI reported 2150 seizures of gold smuggled illegally into the country valued at $97-million, compared to just 150 seizures valued at $24-million during the corresponding period of the previous year.