Heavy gold import widens trade deficit to $17.8 bn

Alarmed over huge gold imports in 2011-12 (at $62 billion) the government,in the last fiscal,raised the basic customs duty on gold twice — from 2 per cent to 4 per cent and then further to 6 per cent,expecting the import to decline.

The Prime Minister’s Economic Advisory Council had expected it to come down to $44 billion in 2012-13. As a result of duty hikes gold imports declined by 33 per cent in the first half,but the trend was reversed in the second half when it increased by 24 per cent in the third quarter,and by 11 per cent in the fourth. As a result,the import of the yellow metal was just 8 per cent less than the 2011-12 level.

Moreover,after gold prices crashed in April — the biggest in 30 years — retail customers went on a buying spree to stock the yellow metal,putting pressure on imports. Gold imports into India,the world’s largest consumer of the metal,stood at around 830 tonne in 2012-13.

“Imports have seen an undue growth of 10.9 per cent (in April to $41.95 billion) largely contributed by significant increase in gold imports,” SR Rao said.

Meanwhile,worried over the widening CAD,the Reserve Bank of India today imposed restrictions on import of gold by banks to moderate the demand for the metal for domestic use. “It has been decided to restrict the import of gold on consignment basis by banks,only to meet the genuine needs of exporters of gold jewellery,” the RBI said. The CAD touched a record high of 6.7 per cent in October-December 2012-13 on the back of rising oil and gold imports.

Abhijit Das,head of IIFT’s centre for WTO studies said that given the worsening balance of payment situation,India can make a case for “an outright ban on import of gold”.

While overall imports during the month stood at $41.95 billion,exports inched up 1.6 per cent at $24.16 billion,remaining positive for the fourth month in a row. After remaining in the negative zone for nine months,exports became positive in January and grew by 0.82 per cent.

The resultant trade deficit was $17.8 billion during the month.

The items that registered growth in the export basket include gems and jewellery,rice,ready-made garments,cotton and marine products,while engineering goods — one of the major export items — posted a decline of 8.6 per cent. Rao said the decline in engineering exports could be contributed to it being less competitive in the global market due to high cost of power. Export of ready-made garments (RMG) also grew 8.6 per cent during the month. Textiles industry,which has been witnessing negative growth,lauded the growth.

A Sakthivel,chairman AEPC,said,“I welcome the positive growth of exports in the ready-made garment sector for April.”

Hit by global slowdown and especially in the traditional markets,Indian exports fell 1.6 per cent to $300.6 billion in 2012-13 while imports increased 0.44 per cent to $491.48 billion,creating a trade deficit of $190.91 billion.