India in the hunt for solid controls on gold imports

NEW DELHI (Scrap Monster) :  The Indian Finance Minister has hinted at the government resorting to more rigorous action to curtail gold imports to the country in an attempt to crack down the Current Account Deficit (CAD) qualms.

Speaking at the Annual day function of the Competition Commission of India (CCI), P Chidambaram appealed to the people of the nation to contain their passion for the yellow metal. He reiterated that the Government would have to resort to more rigorous actions, imposing tight controls on gold imports.

The annual gold imports of the country which is hanging around 1000 tonnes must be chopped to lower levels. The Government intends to bring down the gold imports to 700 tonnes. Surprisingly,  the net imports of gold available for domestic consumption during the first quarter of the year 2013 were 215 tonnes, which when annualized would get easily translated to excess of 900 tonnes.

The Indian Government in the recent past had raised import duties on gold. The Reserve Bank of India (RBI) ordered its member banks to refrain from importing gold on ‘consignment’ basis for anyone other than jewellery exporters. It also tightened screws on gold funding by proposing that the banks must restrict the loan facility on gold coins to a maximum weight of 50 grams. The RBI is to launch index-linked bonds which it hopes may shift investor sentiments away from gold to performing asset class.

Oil and gold imports are considered the two main culprits for the country’s widening CAD. With the S&P junk grade fears still staying close, India is left with no option but to go ahead with more stringent actions that could generate the desired results.