Despite a significant reduction in the current account deficit, curbs on gold imports are unlikely to be fully removed this Budget. Instead, the finance ministry may lower the import duty on the precious metal by two per cent.
“The current account deficit situation is still being closely monitored. The curb on gold imports was one of the main reasons that the CAD was controlled. Until a more sustainable roadmap is worked out for keeping the deficit in check, gold imports will have to be kept under control,” said a senior government official.
But the finance ministry may lower the import duty on gold to 8 per cent from the current rate of 10 per cent. “It is an option. A final decision will be announced in the Union Budget next month,” said the official. Reduction in the import duty can also be made through notifications later during the year by the Central Board of Excise and Customs (CBEC), said the official.
With bullion prices weakening, the CBEC had earlier this week also slashed the import tariff value on gold and silver to $408 per 10 grams and $ 617 per kg, respectively. But the note of caution in the finance ministry comes even as India’s CAD saw a sharp improvement at 1.7 per cent of GDP, or $32.4 billion, in FY14.
With a record high CAD of $87.8 billion or 4.7 per cent in FY13 that was largely fuelled by gold imports worth $ 3-5 billion per month, the finance ministry and the Reserve Bank of India had clamped down on the yellow metal. Through three successive notifications over the course of last year, the government raised import duty on the precious metal to 10 per cent from the earlier rate of two per cent and also made it mandatory to export 20 per cent of the total gold imported.
But the Reserve Bank of India has now partially relaxed import of gold norms by permitting more star trading houses that are the big importers and exporters — to import gold under its existing 20:80 scheme through a notification on May 21.