KOLKATA (miningweekly.com) - Indian gold imports in March might double compared with the same period last year, with the government unlikely to take immediate measures to check the inflow.

According to an official in the Commerce Ministry, while the government was "keeping a close watch on gold imports and its macroeconomic impact, no immediate action was on the cards".

He said that soft commodity and oil prices were limiting the negative impact of rising gold imports and though the government was not ‘complacent’, any immediate measures were ruled out.

During March 2015, India imported 125 t of gold, nearly double that shipped in the corresponding month of 2014.

In value terms, imports in March were estimated at $4.98-billion, up from $1.55-billion and $1.98-billion during January and February, respectively. Gold imports in April were expected to reach 100 t.

However, in contrast to the government’s stance, the Reserve Bank of India (RBI) was taking a more hawkish position, as indicated by its missive earlier this month to all designated gold importing commercial banks and trading houses to explain the cause of the spurt in shipments at a time when reports indicated a stockpile of the precious metal within gold processing industry.

Simultaneously, the much-awaited financial instruments to monetise household gold holdings were still a ‘work in progress’ according to a Commerce Ministry official.

He said that measures to check gold imports would definitely be kept on hold until such time as the government had framed the financial instruments and made an announcement next month.

While presenting the national budget for 2015/16, the government outlined plans to introduce a sovereign gold bond at a fixed interest rate and redeemed in cash based on the gold price on the date of maturity of the bond.

According to rough estimates by the Commerce Ministry, the sovereign bond held the potential of freeing up 25 000 t of gold currently held largely by rural households.

The government was banking on a comfortable current account deficit (CAD) position for not rushing into checking rising gold imports.

For 2014/15, the CAD declined to 0.9% of gross domestic product (GDP) and it was forecast at 1% of GDP for the current financial year. This was down from 4.8% in 2012/13 and 1.7% in 2013/14.

However, the RBI’s concern over rising gold imports was triggered by the decline in Indian merchandise exports and the subsequent fall in foreign exchange earnings. Indian exports were down 21% in March, the sharpest fall in the last six years.

During 2014/15, India’s earnings from merchandise exports were pegged at $310-billion lower than the targeted $340-billion.

Officials said that the difference in stance between trade policy makers in the government and monetary authorities in the RBI would have to be reconciled before any measures to check rising imports could be considered.