India’s official gold imports in 2014-15 stood at 900 tonnes — 36% higher than the previous year’s 665 tonnes, indicating households’ strong preference for the yellow metal as a savings option.
Gold imports are believed to have more than doubled to 125 tonnes in March from 60 tonnes in the same period a year ago.
“The government and the Reserve Bank of India are keeping a close watch on the situation, even though the current account situation is under control,” a senior government official said, adding that the duties are not likely to come down anytime soon.
India had raised the import duty on gold to 10% and imposed the “80:20” import rule in August 2014 to stem dollar flight and contain the current account deficit (CAD) — the measure of the difference between the inflows and outflows of a foreign currency that hit a record high of 4.8% of GDP.
In November this year, the government eased import norms for gold by scrapping the rule that mandated traders to export 20% of all yellow metal imported into the country
The so-called “80:20” import rule, which ties imports to exports, was introduced to discourage inward gold shipments, stem dollar outflows, narrow down CAD and help the rupee that had hit record lows.
However, rising gold imports should not be a cause for worry, said DK Joshi, chief economist, Crisil. “There is enough cushion thanks to lower oil prices, therefore CAD will remain under control,” he added.