India plans to restrict gold imports

Mumbai, February 7, 2013

India's central bank said yesterday it will consider more steps to restrict gold imports and help stem the country's widening current account deficit.

Gold purchases are one of the biggest contributors to the deficit in the current account, the broadest measure of trade. It hit a record $22.3 billion, or 5.4 per cent of GDP, in the July-September quarter, as imports outpaced exports.

"The need to contain the demand for gold imports is critical in a country with insatiable demand for the yellow metal," a Reserve Bank of India (RBI) report said yesterday.

"Given the precarious global economic situation and its impact on Indian exports, there is a clear need to reduce the current account deficit considerably."

India imports about 900 tonnes of gold each year, mainly through designated banks. The government last month increased the import duty on gold to 6 per cent from 4 per cent earlier.

The RBI said it would consider introducing gold-linked financial instruments to divert savings of people from gold bars and coins into bonds. "Creation of an alternative asset class that may provide returns comparable to that in physical gold with similar flexibility is important," the RBI said.-Reuters
 

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