India, the world’s biggest consumer of gold, could implement more measures to curb imports, a top economic official said as the country seeks to narrow a record current-account deficit and check the currency’s drop.
“We are not at the end of our wits as far as gold imports are concerned,” Economic Affairs Secretary Arvind Mayaram told Bloomberg Television India in an interview yesterday. “If required, there are other measures that can be taken and they will be considered at the appropriate time.”
India this month increased a tax on gold imports as it tries to curb demand for the metal that’s contributed to the current-account gap and hurt the currency. The rupee dropped the most in a week yesterday as the central bank left borrowing costs unchanged, after falling in each of the last six weeks and touching a record low of 58.9850 per dollar on June 11.
“They may come up with stricter policies from import point of view by putting some controls or limits on tonnage if the measures already taken do not help,” Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation, said by phone from New Delhi. The government may also explore the option of further raising taxes and tightening financing norms, he said.
India raised the import duty to 8 percent from 6 percent on June 5, a fourfold increase from January last year and the central bank placed curbs on shipments on a consignment basis and limited imports for local consumption against cash only.
Imports surged in the past two months as buyers thronged shops for ornaments, coins and bars after bullion entered a bear market in April as investors sold the metal in favor of riskier assets on speculation that the global economy was recovering.
Any fresh steps to contain gold demand will spur illegal trade and hurt the domestic jewelry industry, which is already facing a supply shortage, Soni said. Banks are charging jewelers a premium of $5.50 an ounce to $6 an ounce over the London cash price for bullion, he said. Gold for immediate delivery fell 0.5 percent to $1,378.26 an ounce by 3:39 p.m. in Mumbai.
Overseas purchases tumbled to an average $36 million a day in the 14 business days through June 7, compared with an average $135 million a day through 13 days until May 20, Raghuram Rajan, chief economic adviser in the Finance Ministry, said on June 11. Gold and silver imports surged 90 percent to $8.39 billion in May from a year earlier, the Commerce Ministry said yesterday.
The shortfall in the current account, the broadest measure of trade, was $32.6 billion in the last quarter of 2012 and is the biggest risk to the $1.9 trillion economy, according to the central bank.
The Finance Ministry is finalizing measures to attract foreign investments, including liberalizing foreign direct investment caps in various industries, Mayaram said. The slide in the rupee value is temporary, he said.
“We need to continue to push for long-term capital inflows and therefore the FDI policy has to undergo a revamp,” Mayaram said. “We need to move in this direction quickly and it needs to be a paradigm shift in how we look at FDI.”