Golden opportunity
One hopes for the sake of the country’s financial stability that Union finance minister P. Chidambaram is not fighting a losing battle against gold imports. He is fighting the formidable forces of greed, lust, envy and plain insecurity that are reportedly forcing people to rush for gold as a measure to hedge against inflation. Or that is what we are told. Imports jumped in the last two years as equities slumped. India’s romance with gold is ages old and is in the blood of almost every Indian.
India is the world’s largest importer of gold at $56.2 billion worth of the precious metal, which means that much foreign exchange has gone out of the country. Mr Chidambaram’s concern is valid as these huge imports add to the country’s current account deficit. Simply put, it arises when export earnings are less than the outgo of dollars through imports, and gold is the second-largest item on the burgeoning import bill after oil. In rupee terms, gold imports are worth `3,05,500 crore.
Last year the government raised customs duty twice to discourage imports, which did fall, but not significantly. It is extremely difficult to see how imports can be discouraged by regulation and duties. If there are weddings, there has to be gold. The saying goes that for men it is cricket, and for women it is gold.
Mr Chidambaram certainly has room to raise customs and other duties and taxes, apart from encouraging schemes like gold loans that would put this gold to more productive use.
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