Finance minister Arun Jaitley said on Tuesday the government is inclined to continue with gold import restrictions brought in by the previous UPA government as the measure had been instrumental in keeping a bloated current account deficit (CAD) in check. “Efforts are being made to continue each of these steps,” Jaitley said in the Rajya Sabha, referring to measures taken by his predecessor P Chidambaram to contain the CAD that had touched a record high of 4.7% of GDP in FY13.
The clampdown on gold imports has led to increased raw material costs for jewellery exporters and shipment of finished gold products have taken a hit.
The crisis on the CAD front started in May 2013 when the US Federal Reserve announced its intent to roll back quantitative easing, leading to a bloodbath in global stocks and money markets. At that stage, the finance ministry and RBI took a number of steps. The import duty on gold was raised thrice to take it at 10% to curb its shipments. The RBI, among other steps, tied gold imports with exports (in 80:20 ratio). “The measures taken by the government and RBI helped contain the CAD to $32.4 billion in FY14 and build up foreign exchange reserves to a level of $316.4 billion on July 4, 2014," Jaitley said in reply to questions in the Rajya Sabha.