Govt plans gold import duty hike to trim CAD
- Bihar records highest ever turnout, exit poll says wait for Sunday
- Maharashtra hands over cases against underworld don Chhota Rajan to CBI
- Protesting against FTII crisis, 24 artists return their national awards
- Ahead of Diwali, PM Narendra Modi launches three gold schemes
- Spot the difference between Delhi and Bihar elections
As the current account deficit (CAD) hit a record 4.6% in the first half of the fiscal, a concerned government decided to clamp down on massive inflows of gold by raising the import duty on the "idle asset" for a third time in one year.
"As would be evident, gold imports constituted a substantial chunk of the imports and is a huge drain on the current account. Suppose gold imports had been one half of the actual level, that would have meant that our foreign exchange reserves would have increased by $10.5 billion. I would, therefore, appeal to the people to moderate the demand for gold, which leads to large imports of gold. I may add that we may be left with no choice but to make it a little more expensive to import gold. This matter is under the government's consideration," Chidambaram said on Wednesday.
"I am confident that even if the year ends with a slightly larger CAD than last year, we would be able to finance the CAD without drawing upon reserves," he added.
Prime Minister Economic Advisory Council chairman C Rangarajan also said: "One of the approaches (to curb the CAD) is to to look at increasing the import duty on gold."
The plan to hike the import duty again from the current 4%, which has effectively been raised four fold since last January, reflects the government's growing uneasiness over large imports of an idle commodity-— unlike crude oil— worsening its current account, which comprises the balance of trade, net factor income such as interest and dividends and net transfer payments.
Although gold imports by India—the world's biggest consumer—dropped 30% in the first half of the fiscal to $20.2 billion, it was still more than what the country had bought from overseas during the entire 2007-08 fiscal and slightly lower than $20.7 billion in 2008-09.
- Welcome to Pakistan, Shah Rukh
- By declaring emergency, the Maldives has only shed its pretence of democracy
- The McKinsey report makes an economic case for gender parity. It’s problematic
- Why India must track China’s 13th five-year plan
- Ancient Roman wisdom 'centuriation' offers a solution to the European refugee crisis
- Congress is as afraid of coming clean as BJP is quick to exploit ambiguities on the issue