Government officials ready plan to ease gold import curbs - sources

MUMBAI/NEW DELHI Wed May 21, 2014 5:35pm IST

An employee shows gold bangles to a customer at a jewellery showroom on the occasion of Dhanteras, a Hindu festival associated with Lakshmi, the goddess of wealth, at a market in Mumbai November 1, 2013. REUTERS/Danish Siddiqui/Files

An employee shows gold bangles to a customer at a jewellery showroom on the occasion of Dhanteras, a Hindu festival associated with Lakshmi, the goddess of wealth, at a market in Mumbai November 1, 2013.

Credit: Reuters/Danish Siddiqui/Files

Related Topics



MUMBAI/NEW DELHI (Reuters) - The Reserve Bank of India and finance ministry officials will recommend that the new government relax strict gold import rules to head off a surge in illegal buying, officials with direct knowledge of the plan said.

Last year, India imposed restrictions on gold imports, the second biggest import after oil, following a steep rise in the country's current account deficit.

However, the curbs spurred smuggling into India, the world's biggest buyer, through illegal "hawala" channels, which are informal international networks for remitting money.

"We don't want to suppress demand artificially as it is creating hawala money. The longer you wait, the more will be such parallel channels," one of the officials said.

The incoming prime minister, Narendra Modi, who led the Bharatiya Janata Party (BJP) to a decisive victory in a just-concluded election, has indicated his willingness to remove the gold curbs.

Modi will be sworn in on Monday and the plan to ease the curbs is ready for his government to take up.

"The next finance minister can sign the file on gold imports whenever he wants to sign it," one of the officials said.

The curbs would be removed in phases, the officials said.

The RBI did not have immediate comment.

"Let the new finance minister take charge. Only then such issues can come up for a decision," said D.S. Malik, spokesman at the Ministry of Finance.

India raised the gold import duty last year to 10 percent from 4 percent and also mandated that 20 percent of imported gold be exported, which is known as the 80:20 rule.

The current account deficit hit a record high of 4.8 percent of gross domestic product, or nearly $88 billion, in the fiscal year that ended in March 2013, pushing the rupee to a record low of 68.85 to the dollar in August.

The crackdown on gold imports helped trim the current account deficit to 0.9 percent of GDP in the December 2013 quarter, compared with a record 6.5 percent a year earlier, while the rupee has strengthened to 58.81.


The central bank met on Monday with officials from top gold importing banks, including Axis Bank (AXBK.NS), Bank of Nova Scotia (BNS.TO) and State Bank of India (SBI.NS), to discuss the difficulties posed by limited supplies, according to two bankers who were present.

Roughly 200 tonnes of gold were imported illegally in 2013, according to industry estimates.

Legal imports totaled 860 tonnes in 2012, but eased to 825 tonnes in 2013, when the curbs were imposed, and stood at 190.3 tonnes in the first three months of 2014.

Amid expectations the curbs will be relaxed, premiums on gold in India fell to $88 an ounce on London prices on Wednesday. International prices XAU= traded at $1,293 an ounce. Premiums rose to a record high $160 an ounce in December.

"Modi has committed to us that he'll come out with a solution," said Kumar Jain, vice-president of the Mumbai Jewellers Association.

We expect some good news to come in July either by lowering of import duty or easing of 80/20 rule."

(Additional reporting by Siddesh Mayenkar in MUMBAI; Editing by Tony Munroe)

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

  • Most Popular
  • Most Shared


Falling Oil Prices

Falling Oil Prices

Indian consumers respond to softer oil, food prices  Full Article 

Asian Markets

Asian Markets

Asian shares shine on U.S. tech results, ECB hopes  Full Article 

Pollution Levels

Pollution Levels

Delhi braces for worst air quality this Diwali week.  Full Article 



WTO prepares for crisis talks as India keeps veto on global deal.  Full Article 

Deal Talk

Deal Talk

Smartphone repair company B2X steps up expansion with Indian deal.  Full Article 

Ebola Outbreak

Ebola Outbreak

India to step up travel surveillance to stop any Ebola outbreak  Full Article 

Reuters India Mobile

Reuters India Mobile

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