Commerce and industry minister Nirmala Sitharaman has pitched for “restriction-free” imports of gold to help gems and jewellery exports and also discourage smuggling.
While restrictions on gold imports could be justified on the grounds of maintaining the balance of payments (BoP), one needed to be mindful of the fact that such barriers encouraged smuggling, the minister said.
The custom authorities had seized huge quantities of smuggled gold from cities such as Delhi, Kochi and Chennai.
“So while from BoP point of view, it is nice, but restrictions are also leading to these kinds of channels which are unwanted and undesirable,” Sitharaman told PTI. “Ideally, I would like to see it free of restrictions.”
The imported gold is mainly used by gems and jewellery exporters and people usually consider investment in the precious metal as safe haven.
The minister said gold is consumed used as a raw material by handicrafts and gems and jewellery exporters as these are segments give high-value returns.
She further said the ministry last year had recommended import-duty cut on gold, but “given the situation then, I think nothing moved in our favour”.
“But now I think, it is a question of economy where fresh look is being given to everything, we will make our presentation, we will see what the finance minister would want to do,” she said.
Outbound shipments of gems and jewellery, which account for about 13% of the country’s total exports, in October rose by 22% to $ 4.38 billion.
Arresting the eight-month fall, gold imports more than doubled to $3.5 billion in October. The imports had stood at $1.67 billion in October last year.
The country’s total official gold imports declined to 60 tonnes in April-July of this fiscal, much lower than 250 tonnes in the year-ago period.
India, the world’s second biggest consumer of gold after China, imported 650 tonnes in 2015-16.
Gems and jewellery sector had in July urged Prime Minister Narendra Modi to reduce gold import duty to 5% from 10% to check shift of business to neighbouring countries.
In 2013, the government increased the import duty to 10% to discourage the imports and contain current account deficit.