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Five reasons why government is likely to ease gold curbs

5 reasons why govt is likely to ease gold curbs

The Centre is likely to ease restrictions on gold imports and a decision is expected soon. 
The Centre is likely to ease restrictions on gold imports and a decision is expected soon. Last year, the government imposed restrictions on gold imports, the second biggest import after oil, following a steep rise in the country's current account deficit.

(1) There is an improvement in the current account deficit (CAD) situation. Latest data shows that CAD narrowed to 0.2% of the gross domestic product during the January-March, from record highs of 6.7% of GDP a year ago. India raised the gold import duty last year to 10 per cent from 4 per cent and also mandated that 20 per cent of imported gold be exported, which is known as the 80:20 rule.

(2) Restrictions on gold import has also resulted in resumption of smuggling of the yellow metal. The World Gold Council data shows a sharp hike in gold purchases in the UAE in the last quarter. It is evident that India's import curbs and high import duties have opened up a lucrative business for smugglers. Gold from the UAE was being channelled into India.

(3) The Reserve Bank of India (RBI), which had also imposed curbs on gold imports, has eased some of the restrictions. Relaxing rules for importing gold, the RBI on May 22 allowed star/premier trading houses to bring in the yellow metal for sale in the domestic market.

(4) Clamping down on gold imports has helped the Union government trim the CAD, but it has affected the jewellery industry adversely.

(5) Small jewellers have been complaining about the restriction on imports, generating a favourable response from several BJP leaders. They had told the industry body in February that if the party came to power, it would review the gold policies in the first three months in power.


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