India's CAD Halves on Gold Imports Ban, Chidambaram "Weighs Easing"
Monday, 2/17/2014 16:35
"Pros and cons" says finance minister, as gold jewelry exports also halve...
GOLD IMPORT restrictions in India, formerly the world's No.1 consumer nation, are likely to be relaxed in the next six weeks, finance minister P.Chidambaram hinted on Monday.
Presenting an interim budget to parliament, and ahead of April's fiscal year-end, "The goal is to contain the CAD at a level where it can be fully and safely financed," he said.
"There are pros and cons," the finance minister then said when asked by journalists about relaxing the gold import rules after his speech today.
"We will weigh them carefully...we will look into it.
On Chidambaram's figures, India's effective ban on gold imports has helped cut the Current Account Deficit (CAD) almost in half this fiscal year.
Projected to reach $45 billion for 2013/14, the CAD – which measures the gap between inflows and outflows of currency to the economy – is down from $88bn in 2012/13.
Last year saw $50bn worth of
physical gold bullion imported to India, the second-largest item after crude oil.
Speaking about the
gold imports rules last month, "In the long term, policy repression is not the solution," Chidambaram said, also pointing to end-March for a possible easing.
"We have to look at a way to increase our exports and earn foreign currency to pay for our imports."
India's exports of gold jewelry have sunk alongside gold imports however, the Gems & Jewellery Export Promotion Council (GJEPC) said today.
The key gold-import rule, imposed after record-high inflows last summer, forced importers to re-export 20% of all new shipments. Confusion over that rule, plus 10% import duty and other restrictions, has now seen exports of finished jewelry fall 50% in April-Jan. from the same period last year, reaching only $5.5 billion.
Ahead of May's general election in India, "
Both major parties are now happy to see gold imports rise," notes a report from Japanese trading conglomerate Mitsui, "although any final decision will be taken by the Reserve Bank of India."
"Should India relax its import restrictions," says the latest Metals Matters monthly report from London bullion market-maker Scotia Mocatta, "then [Western] institutional investors, China and India might all be competing for physical gold."
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