Government Mulls Re-imposing Gold Import Curbs To Control Trade Deficit

Just a few months after relaxing the gold import rules, the government is now planning to re-impose the curbs as the country's fascination for gold has led to a surge in the import of gold.

The revenue department of the Finance Ministry has asked the Department of Economic Affairs (DEA) and the Reserve Bank of India (RBI) to reconsider the May 21 relaxation in the import rules.

The RBI had relaxed the 80:20 rule, as it is called, in May at the behest of the Finance Ministry. Under this rule, nominated agencies were allowed to import gold provided they agreed to export 20% of the import.

In September, the trade deficit increased to an 18-month high of $14 billion following a 450% increase in gold imports as importers were in a hurry to take advantage of the relaxation. "Gold imports have risen since the norms were relaxed...There is a concern. We have written to the DEA and the RBI," said a finance ministry official."

Experts welcomed the move. "Given the country's dependence on imported commodities and fluctuation in currency, government will take all steps to address any factor that seeks to threaten macroeconomic stability of the country," said DK Pant, chief economist, India Ratings.