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Jan. 2 (Bloomberg) -- India, the world’s largest bullion buyer, may raise taxes on gold imports to help tackle a record current-account deficit, Finance Minister Palaniappan Chidambaram said.

“We may be left with no choice but to make it a little more expensive to import gold,” Chidambaram said, reading from a statement in New Delhi today. “The matter is under the government’s consideration.”

Curbs may crimp gold demand in Asia’s third-largest economy, hurting prices that rallied for a 12th year in 2012 as investors held record amounts in exchange-traded products and central banks stepped up purchases. About 80 percent of India’s current-account deficit is attributable to gold imports, Reserve Bank of India Deputy Governor Subir Gokarn said in November.

“Demand will slow down further if taxes are raised. The jewelry industry is already facing the brunt of a slowing economy,” Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation, said by phone from New Delhi. Imports may decline by 20 percent to 25 percent in 2013 from an estimated 750 metric tons last year, he said.

Gold for immediate delivery climbed as much as 0.7 percent to $1,684.75 an ounce today, the highest level in two weeks, after the U.S. Congress agreed to a budget deal. Prices gained 7.1 percent in 2012.

Record Deficit

“An import-duty hike is possible,” said Madan Sabnavis, chief economist at Credit Analysis & Research Ltd. in Mumbai. Increasing the import duty “seems like a sound decision.”

Taxes may be raised to 6 percent from the current 4 percent over time, Bamalwa said.

Last March, India doubled the tax on purchases of gold bars and coins to help narrow the current-account gap. Still, demand for gold picked up “significantly” in the July-to-September quarter, the Reserve Bank of India said in its biannual Financial Stability report last month, which flagged the deficit and said there was depreciation pressure on the rupee.

India’s current-account deficit widened to $22.31 billion in the three months to Sept. 30 as a faltering global economy hurt exports, the Reserve Bank of India said Dec. 31. That was in line with the $22.3 billion median estimate of 12 economists in a Bloomberg survey. The current account is the broadest measure of trade, tracking goods, services and investment income.

Gold imports are “a huge drain,” Chidambaram said today. “Suppose gold imports had been one half of the actual level, that would have meant that our foreign-exchange reserves would have increased by $10.5 billion. I would therefore appeal to the people to moderate the demand for gold.”

Indian Prices

Imports by India rose for the first time in five quarters in the three months to Sept. 30, according to the World Gold Council. Imports jumped 9 percent to 223 tons in the third quarter of 2012 from 205 tons a year earlier, the producer-funded group said in a report on Nov. 15.

Bullion in Mumbai, which surged to a record 32,464 rupees ($598) per 10 grams on Nov. 26, gained 13 percent in 2012 after the rupee fell about 3.5 percent against the dollar. Gold for February delivery climbed 0.5 percent to 31,044 rupees on the Multi Commodity Exchange of India Ltd. at 4:02 p.m. in Mumbai.

Buying gold is considered auspicious during religious festivals and weddings in India. The festival season starts in August and ends in November, and is followed by the wedding season.

To contact the reporters on this story: Swansy Afonso in Mumbai at; Glenys Sim in Singapore at

To contact the editor responsible for this story: Jake Lloyd-Smith at

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