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Gold, gadgets to cost more in govt's Rs. fight

business Updated: Aug 13, 2013 08:58 IST
HT Correspondent
HT Correspondent
Hindustan Times
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Gold and silver are likely to become costlier. To stabilise a weakening rupee, the government is set to hike customs duty on precious metals and taxes on high-end TVs and smart phones. In the process, you will end up bearing the cost of a creaking foreign exchange deficit.

As government officials finalised the details of a new set of imports curbs, finance minister P Chidambaram said on Monday four state companies will issue "quasi-soverign" bonds for the government to shore up its dollar stash.

These measures, along with others announced on Monday such as easier overseas borrowing norms and more attractive returns on NRI deposits in Indian banks, are estimated to fetch the government an additional $11 billion (Rs 66,000 crore), crucial to strengthen the rupee that has fallen by over 15% since May.

The measures are part of a strategy to rein in India's current account deficit (CAD)-the difference between dollar inflows and outflows-to about 3.7% of GDP from a record 4.8% of GDP last year.

The government is likely to inform Parliament on Tuesday about a possible two percentage point hike in import duty on gold - from 8% to 10%. Import duty on silver is also likely to be raised by two percentage points to 8%, sources indicated.

Chidambaram, who addressed a press conference hours after he made a suo motu statement in Parliament on measures to prop up the rupee, said that state-owned oil companies would be permitted to raise additional foreign loans or external commercial borrowings (ECBs) up to $4 billion (about Rs 24,000 crore).

Chidambaram said that interest on foreign currency non-resident accounts has been liberalised to attract more deposits, while the RBI will issue notification to allow Indian subsidiaries of multinational corporations to raise funds from parent companies.

He said that state-owned IRFC, PFC and IIFCL will be allowed to collectively raise $4 billion through quasi-sovereign bonds for the infrastructure sector.

"We may save $4 billion in gold import and $1.5 billion in oil import," the minister said, adding that the gold import in the current fiscal was likely to come down to 850 tonnes from 950 tonnes in 2012-13.

The additional $11 billion in the wake of the fresh set of measures will likely push dollar inflow into India to $75 billion. This will enable the government to finance the CAD fully and also add to the foreign exchange reserves that currently stand at $285 billion.