Concerned over rising gold import and widening current account deficit (CAD), Finance Minister P Chidambaram today said government is considering steps to make import of the precious metal more expensive.
"Demand for gold must be moderated... We may be left with no choice but to make it a little more expensive to import gold. The matter is under government consideration," he told reporters here.
The CAD, which represents the difference between exports and imports after considering cash remittances and payment, has widened to $38.7 billion or 4.6 per cent of the GDP during the first half of the current fiscal, he said.
This was mainly contributed by gold imports which amounted to $20.25 billion.
Had the gold imports been half of the actual level, Mr Chidambaram said, "our foreign exchange reserves would have increased by $10.5 billion" as against the marginal accretion of $0.4 billion during April-September.
According to the Minister, the country cannot afford to spend so much on importing gold. "Nobody says gold within the country should not be used for whatever purpose. There is enough gold within the country. But import of gold is huge strain on the current account," he said.
During fiscal year 2011-12, gold imports stood at $56.2 billion.
On reports of smuggling of gold, Mr Chidambaram said, it is mostly speculative. "May be some smuggling has taken place but whatever level of duty, there is always smuggling."
In order to curb demand of gold, the then Finance Minister Pranab Mukherjee in his Budget last year had doubled the basic customs duty on standard gold bars to four per cent and on non-standard gold to 10 per cent.
There has been moderation of gold imports as a result of government policies during the first half of the current fiscal.
In value terms, gold imports at $20.2 billion in the April-September reflects a decline of 30.3 per cent over the corresponding period a year ago.
The decline can partly be attributed to increase in customs duty on gold imports by government in January and March 2012.
As more is needed to be done, Mr Chidambaram appealed to the people to "moderate demand for gold which leads to its large imports".
Traditionally, India has been the world's largest consumer and importer of gold. The price of gold in the national capital yesterday rose by Rs 155 to Rs 31,145 per 10 gm, while silver became expensive by Rs 740 to Rs 57,740 per kg.
The main contributors to the widening of CAD, Mr Chidambaram said, were declining exports which slipped by 7.4 per cent during the first half of the current financial year and rising imports which went up by 4.3 per cent in the same period.
The gap in export and import, he added, was partly made up "by an increase in services exports of 4.2 per cent and, consequently, surplus in services which amounted to $29.6 billion and remittances of $32.9 billion".
The CAD, the Minister said, was financed without drawing on country's foreign exchange reserves, mainly because of adequate inflows of FDI ($12.8 billion) and FII ($1.7 billion).
The net result, Mr Chidambaram said, is that "we have not drawn on the foreign exchange reserves and, in fact, there is a marginal accretion of $0.4 billion to the reserves."