Government may further ease restrictions on gold import soon: Finance Minister

Finance Minister P Chidmabaram on Monday indicated that government may further ease restrictions on gold imports after monetary policy announcement by the Reserve Bank of India (RBI) on April 1, as the current account deficit has moderated to about $35 billion.

"Some relaxations were made a few days ago when more banks were allowed to import gold. We could consider some more relaxations in consultation with RBI," he said while releasing the year-end report on economy.

"Let the RBI's monetary policy be announced tomorrow and then we will consider whether some relaxation can be done," he said.

Emphasising that the economy today is far more stable and far stronger than what it was 20 months ago, he said the current account deficit is expected to come down about $35 billion during the current fiscal year.

It was at a record high of $88.2 billion, or 4.8 per cent of GDP, as gold imports soared 845 tonnes last fiscal year.

In order to restrict current account deficit, the government took measures to curb gold import. The government raised import duty on the precious metal three times taking it to 10 per cent and also made it mandatory to export 20 per cent of the total gold imported.

Following this gold imports came down to 19 tonnes in November from a peak of 162 tonnes in May. The current account deficit, too, was brought down to 3.1 per cent in April-September of the ongoing fiscal year, from 4.5 per cent in the same period last year.

Gold imports have fallen substantially after the restrictions. Gold and silver imports declined 71.4 per cent to $1.63 billion in February.

Imports of gold and silver in February 2013 stood at $5.24 billion. In January this year, they were $1.72 billion.

Earlier this month, the RBI allowed more banks, including Axis Bank and Kotak Mahindra Bank, to import gold under the 80:20 scheme.

Under the 80:20 scheme, which was introduced on August 14, nominated agencies could import gold on condition that 20 per cent of the shipment would be exported and the remainder kept for domestic use. Permission for subsequent imports would be given on fulfilment of the export obligation.

So far, only six banks and three financial institutions were allowed to import gold under the 80:20 scheme. On a consignment basis, 21 banks, as permitted by the RBI, can import gold and silver.