In the clearest indication ever that the plans were afoot to cut taxes on gold, the government on Wednesday said that there was a need to ease norms for bullion imports to boost supplies and jewellery exports.
“There is a need of rationalisation in (gold import) duty and (gold import) procedure....We have already made it clear that there is a need to look at the current gold import regime,” commerce secretary Rajeev Kher told reporters in New Delhi.
India had raised the import duty on gold from 4% to 10% in order to control the current account deficit (CAD) — a broad measure of dollar inflows and outflows. The CAD had hit a record high of 4.7% of GDP in 2012-13 and the rupee had plunged to a record low of 68.85 against a dollar.
The gap has tapered down sharply over the last three quarters as the government and the Reserve Bank of India launched a string of steps including curbs on gold imports and measures to attract foreign capital.
India’s CAD has dropped sharply to 1.7% of GDP or $32.4 billion in 2013-14, primarily aided by plunging gold imports.
“If you feel that the initial concerns of CAD are fully addressed, as we hope to in the next several months, then there will be a reason to restore or at least to some extent the (earlier) position (on gold imports),” he said. “There is a clear perception that there could be something that could have to be done. It will happen in the Budget if it has to happen,” Kher added.
Gems and jewellery exporters, which approximately accounts for about 15% of India’s total outbound shipments, has been pitching for lifting gold import curbs. Gold imports in May dipped by 72% to $2.19 billion, as against $7.7 billion in May 2013.
India’s exports rose 12.4% in May to $28 billion, the highest in six months on high global demand. However, trade deficit — the gap between export earnings and import payments — galloped to a 10-month high of $11.23 billion during the month.
“It is definitely an encouraging sign. This is the first time in the last six months that we have recorded a double digit growth. If this trend sustains then I am sure we are reviving...It seems that they (export products) are now acquiring there natural levels,” Kher said.
Imports rose to $39.23 billion in May against $35.7 billion in the previous month.