India to review gold restrictions by end-March

NEW DELHI Mon Jan 27, 2014 12:29pm IST

Customers shop inside a gold jewellery showroom in Mumbai August 30, 2013. REUTERS/Danish Siddiqui/Files

Customers shop inside a gold jewellery showroom in Mumbai August 30, 2013.

Credit: Reuters/Danish Siddiqui/Files

Related Topics

NEW DELHI (Reuters) - India will review its tight curbs on gold imports by the end of March, the finance ministry said on Monday.

India used to be the world's biggest buyer of bullion until last year when a swollen current account deficit prompted the government to slap a record 10 percent duty on imports and the central bank to tie imports to exports.

With the current account deficit now expected to be sharply down in the current fiscal year and the leader of the Congress party, which heads the government, reportedly asking for a reprieve, a change was increasingly on the cards.

Any easing of curbs could boost imports and might make smuggling less attractive.

Revenue Secretary Sumit Bose said on Monday a review of gold curbs will come by the end of March, which coincides with the end of India's fiscal year and collating of budget figures.

Finance Minister P. Chidambaram had said earlier on Monday there could be a review of curbs by the end of this year but had not clarified whether he meant the fiscal or calendar year.

The government has often linked any relaxation of the rules with an improvement in the current account deficit but last week, Congress party leader Sonia Gandhi asked for consideration of complaints from the industry, according to media reports.

The Reserve Bank of India, which has said 20 percent of all imports must be used for exports, is unlikely to review its rules until after the end of March, a policymaker directly handling gold import regulations said last week.

Gold imports have dropped by more than half in recent months under the restrictions and touched 21 tonnes in November.

Bose added that imports in December were higher than in November but did not give any details.

India's current account deficit is now expected to be below $50 billion in this fiscal year compared with earlier estimates of about $70 billion. Last year it was a record $87.8 billion.

"(If the curbs are eased), official numbers will definitely increase and smuggling will reduce," said Helen Lau, senior analyst at UOB-Kay Hian Securities in Hong Kong, adding that pent up demand from retailers could boost imports.

Lau, however, said the easing of the central bank's curbs, known as the 80/20 rule, to 90/10 would have a bigger impact on imports than lowering the record duty of 10 percent.

India's official 2013 trade figures showed that imports started dropping significantly only after the 80/20 rule was introduced.

Gold prices were trading near their highest in more than two months on Monday due to sliding equities. The news from India did not have an impact.

(Reporting by Manoj Kumar; Additional reporting by A. Ananthalakshmi in SINGAPORE; Editing by Muralikumar Anantharaman)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Health Reforms

REUTERS SHOWCASE

Record Highs

Record Highs

Nifty touches record high; software stocks gain.  Full Article 

New Adviser

New Adviser

Arvind Subramanian likely to be chief econ adviser.  Full Article 

Pricing Mechanism

Pricing Mechanism

Govt sets up a four-member panel to re-examine gas pricing.  Full Article 

Royalty Rates

Royalty Rates

India to hike iron ore royalty, miners may struggle to pass on extra cost.  Full Article 

Diesel Deregulation

Diesel Deregulation

Oil ministry to seek Cabinet nod on diesel deregulation - sources  Full Article 

Commodities

Commodities

Gold near two-month low; set for weekly drop on interest rate fears  Full Article 

Reuters Exclusive

Reuters Exclusive

Apple iPhone 6 screen snag leaves supply chain scrambling   Full Article 

Helping Regional Mills

Helping Regional Mills

Govt raises sugar import duty to 25 pct from 15 pct.  Full Article 

Curbing Risks

Curbing Risks

RBI to lower ceiling on bank loans to a single corporate group.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage