Govt to keep CAD in control by lower gold imports

The finance ministry gets tougher on gold imports. More measures are likely to curb imports to reign in the current account deficit. Measures include banning sale of gold coins by banks and reviewing the gold import export policy.

North block has sent out a strong message saying that they are going to come down heavily on gold imports, reports CNBC-TV18's Aakansha Sethi. Also read: Govt may take more steps to curb gold import: FinMin The hike in import duty had tempered gold imports, but in April this year there were around 138 percent hike. In April and May together the Finance Minister (FM) said that there have been imports of about 400 tonnes of gold. Alone in May there were about 262 tonnes that could be on account of the auspicious days when gold buying is most preferred in India. However, that has got the Finance Ministry worried. Due to this the trade deficit had also widened on a year-on-year (YoY) basis in April. That is something that the FM is very concerned about because of its impact on the current account deficit and on the rupee. Hence, now the Finance Ministry will hold a meeting with the Commerce Ministry. Today in the Financial Stability and Development Council (FSDC) all the regulators were present and this was a matter that was reviewed and a broad direction was given. After the meeting with the Commerce Ministry the final details will be worked out. What it is looking at in terms of measures is on the gold export and import policy. Two key steps: 1) Checking consignment imports. Almost 36 companies in India private and states such as Metals and Minerals Trading Corporation (MMTC), State Trading Corporation (STC), etc are allowed to import gold. Now, the Reserve Bank of India (RBI) has already put restrictions on consignment imports by banks. These restrictions are also going to be considered for these other companies such as MMTC for gold imports. 2) There maybe some kind of limitation on curbs on sale of gold coins by banks. That is again found to be a reason that fuels imports of gold. Apart from this, another hike in gold import duty at this stage is unlikely. It maybe an option that maybe considered later, but at this point in time it is unlikely because that activates smuggling and unauthorised channels as well. So, it remains to be seen what steps the government finally takes. However, one thing is clear the FM himself has said that some steps will have to be taken.