The government is unlikely to ease restrictions on gold imports at least until the end of the current fiscal and will take any decision after assessing the current account deficit (CAD) level for 2014-15, economic affairs secretary Arvind Mayaram said on Tuesday.
He also rejected the argument that the curbs on gold imports had resulted in massive smuggling, contending that there was no ?conclusive evidence? to prove it.
?Our point is that we need to keep the CAD low. We cannot afford to let it go and therefore, at least for this fiscal, we should not tamper with what the regime is… and whatever is to be considered should be considered in the next year, after fully understanding how the CAD will look for the next year,? Mayaram said.
While finance minister P Chidambaram said recently some restrictions on gold imports should continue, RBI governor Raghuram Rajan last month favoured easing the measures at an appropriate time, suggesting that smuggling could rise if the curbs remained in force for a long time. “Once we feel more comfortable with the CAD, once we have a sense the tapering, at least the threat of it, is behind us, we will certainly consider unwinding some of these distortionary actions,” he said.
However, Mayaram said: ?What is the total compression in gold we are looking at? About 100-150 tonne. What is the total seizure you get? It is minuscule… So, if you look at the trade-off, we need to increase vigilance to be able to check any rise in smuggling. But at the same time, we cannot afford to allow the CAD number to become weak because it has a bearing on how the rupee behaves.?
Although the rupee has appreciated 9.5% against the dollar since its lowest in August 2012, it still remains weak and has depreciated 15% since last year’s peak in February. Mayaram said the finance ministry gets various suggestions and one view is to open up gold imports as demand has been compressed significantly.
Gold imports dropped to 19.3 tonne in November from a record 162 tonne in May, thanks to a series of steps taken by both the government and the central bank.
The government raised the import duty on gold to 10% in August last year, after hiking the duty periodically from 4% in the beginning of last year. Authorities intensified the crackdown on gold imports, especially since June, after imports in the first two months of this fiscal exceeded a record 300 tonne, worsening fears of a runaway CAD.
