The FM‘s appeal comes at a time when India is battling with twin deficits- fiscal deficit and current account deficit (CAD) that are slowing the pace of the economy.
"I can only appeal to you and through your channel to the people not to demand so much gold."
The Finance Minister, P Chidambaram made this statement in an interview to CNBC-TV18's Shereen Bhan a day after he announced the Union Budget 2013-14. The FM's appeal comes at a time when India is battling with twin deficits- fiscal deficit and current account deficit (CAD) that are slowing the pace of the economy.
The Economic Survey pre-Budget too laid emphasis on reducing gold and oil imports in order to contain the CAD. "The room to increase exports in the short run is limited, the main focus has to be on curbing imports, mainly by making oil prices more market-determined and curbing import of gold to contain current account deficit (CAD)," the Survey said.
To read the entire transcript of Chidambaram's interview, click here.
Chidambaram too credits India's large CAD to the various commodities imported like crude oil, coal, edible oil, pulses and gold. While everything barring gold is a necessity, Chidambaram says despite his appeal, he isn’t too sure people will pay heed to his appeal.
While the FM did not hike import duties on the coveted yellow metal in the Budget, he raised duty free limit on it instead. The duty free limit on gold is now Rs 50,000 for males and Rs 100,000 in case of females. "There is a point at which more duties will only tempt people to indulge in more smuggling," says Chidambaram justifying his decision to not hike import duty on gold. On what can be called as unintended consequence of hiking import duties,
Chidambaram is also fighting any indulgence in gold smuggling. "I don’t think we have reached that point yet and we shouldn’t reach that point," says Chidambaram hopefully.
Chidambaram hiked gold import duty from four percent to six percent on January 21 in a move to dissuade people from buying more gold and thereby raising the CAD. "We threw some sand in the wheels to make gold imports a little more costly and it has brought it down to some extent," adds Chidambaram.
Reiterating his appeal, Chidambaram says if the people of India stop buying gold for a year that will solve most of the economic problems for that year.