Govt expects drop in gold imports by next month

[1]

Terming 138 per cent surge in gold imports last month as an “aberration”, the government today expressed the hope that appetite for foreign gold would subside by next month due to the high inventory costs.

Overall, the recent surge in imports has attributed to the drop in global commodity prices, including gold. Talking to reporters, economic affairs secretary Arvind Mayaram said it appears that to hedge against future rise the traders in India have imported large quantity of gold.

“Its an abberation... But then, there is a limit how much you can buy and hold. Because there is carrying cost to that. So, I believe we will see correction by next month. And we don’t believe imports are going to be at same level,” he said.

The rise in gold imports is a concern for the policy makers as it puts pressure on the Current Account Deficit (CAD), affecting the foreign exchange situation.

Planning Commission deputy chairman Montek Singh Ahluwalia too said that there would be significant drop in gold imports in the current fiscal.

He said traders take decision regarding importing gold several months in advance. “So I don’t know to what extent the actual import took place based on order that would have been placed in February or March... I don’t think this gold import to continue.

“I would expect in the year 2013-14, given the changing economic situation, there will be significant easing off of gold imports,” Ahluwalia said.

The normal gold import should be half of what actually took place last year, he added. Gold imports into India, the world’s largest consumer of the metal, stood at around 830 tonne in 2012-13 fiscal. It jumped by 138 per cent to $7.5 billion last month, highest so far this year, pushing up the trade deficit to $17.7 billion and may worsen the CAD this fiscal.

The government has taken several steps, including raising import duty, to curb the inbound shipments of gold. RBI too has put restriction on banks to import gold.