The pre-Budget Economic Survey today suggested that more steps are needed to curb gold imports in order to bring the current account deficit (CAD) down to a comfortable level.
"The CAD in the first half of 2012-13 has been 4.6 per cent of GDP. Available indications do not seem to suggest any improvement in the current account balance in the second half.
There is a case for discouraging imports of commodities like gold and making efforts to raise exports," the Survey said.
Since there seems to be little that can be done to temper oil imports, given soaring energy and transportation needs, gold is the component that needs to be contained to bring the CAD back to a comfort zone, it said.
While the government has "thrown sand in the wheels" by raising the tariff on gold from 4 per cent to 6 per cent in order to discourage imports and tried to unlock passive gold holdings through gold loans, gold purchases are likely to come down primarily when households see attractive alternative investment avenues, it added.
Suggesting long-term ways to address the rising demand for gold, the survey said the overarching motive underlying the gold rush is high inflation and the lack of financial instruments available to the average citizen, especially in the rural areas.
"The rising demand for gold is only a 'symptom' of more fundamental problems in the economy. Curbing inflation, expanding financial inclusion, offering new products such as inflation indexed bonds, and improving saver access to financial products are all of paramount importance," it said.
The value of gold imported during April-December of this fiscal fell by 14.7 per cent to USD 38.02 billion, while the volumes declined by 11.8 per cent from a year-ago period.
The report suggested the government to be vigilant regarding gold inflows through unauthorised channel.
Gold has been a combination of investment tool and status symbol in India. With limited access to financial instruments, especially in the rural areas, gold and silver are popular savings instruments. The recent economic uncertainty has seen people across the board buy gold.
The last three years have seen a substantial rise in gold imports contributing significantly to the current account deficit along with oil.