- Indian rupee recovers 31 paise to 61.85 vs US dollar on strong equitiesGold futures prices fall as rupee strengthensIndian rupee gains tracking shares against US dollar to 61.85Equity market outlook: Nifty Jan Fut can test 6455 and 6520 levels, Ranbaxy Laboratories, SSLT stocks to watch
Given Indias gold imports in the first 8 months of FY14 have only been around $24.4 billion versus $53.7 billion in FY13, and gold prices have crashed by around a fourth in the last one yearfrom $1,664 per troy ounce to $1,213 todayperhaps it is time for the government to start thinking of easing gold curbs. For one, with the economy doing better, chances are demand for gold will ease a bit, but even if it doesnt, the combination of lower prices and a more stable rupee will keep imports under control. In any case, it is well accepted that the gold problem would not have been anywhere as severe as it was made out to be had coal and iron scrap imports not ballooneda result of, respectively, protecting the inefficient Coal India and banning miningand if exports of iron ore had continued. So the solution doesnt lie in curbing gold imports, it lies in freeing up the coal sector and getting mining going. Two, the current account deficit can certainly handle any possible strain betterat 1.2% of GDP for the September quarter, this is dramatically lower than the 5% a year ago or the 6.7% of GDP in the December 2012 quarter. Indeed, as compared to FY13s $88.2 billion CAD, FY14s CAD is likely to be $50-55 billion. In other words, were gold imports to rise once again, the economy is in a much better position to take care of the problem.
More important, imports of gold did not really slow despite the sharp hikes in duty levels till June 2013in volume terms, the 338 tonnes imported in the June quarter was the highest in the last 8 quarters. This is despite hiking import duty on gold from a flat R300 per gram to 2% in January 2012, 4% in March, 6% in January 2013, 8% in June and then 10% from August 13. It is difficult to say if imports of gold came down to 85 tonnes in the September quarter because of the further 4 percentage point hike in import duties since January or because of the sharp depreciation of the rupee, both of which would have been partially neutralised by the fall in global prices of gold. The more likely explanation is that, with economic prospects looking bettercertainly the global ones are a lot better, suggesting a lifting of Indian growth as welldemand has compressed on its