P Chidambaram advises against lifting curbs on gold imports

[Editor: Narendra Modi and some of his partners who made lot of noise during the UPA rule regarding import restrictions on GOLD are tamely following the UPA government's policies; after they assumed office, following a landslide victory in the last (2014) Lok Sabha Elections. This is called U-turn. The current NDA government under the leadership of Narendra Modi has become famous for such outlandish somersaults. Meanwhile, though the bullion trade has asked the Government to recognise a body of its representatives to discuss its issues--nothing much has happened in this front. “Currently, the Centre is discussing our issues with the jewellery body which has no understanding of our problems,” said Satish Bansal, Managing Director, MD Overseas Ltd. “The 80:20 scheme has forced bullion traders to turn exporters,” he said. According to Prithiviraj Kothari, Managing Director, Riddhi Siddhi Bullions, the Centre should replace the scheme with a quota or a licensing system like in China. In China, only nine banks and some People Bank of China-owned coin companies have the right to import and export gold. The bullion trade also wants the Customs duty cut gradually to 4 per cent. It has also urged the Centre to raise the gold brought by non-resident Indians to 5 kg. The restrictions are perceived to have increased, the instances of smuggling. But India's commerce minister, Nirmala Sitharaman says, "I cannot say that gold smuggling has increased because of hike in import duty. CAD has come down, but there is no thought to lower the import duty immediately".  It therefore, remains to be seen when we will start to see innovative policies from Narendra Modi and his team of "COPY-PASTE-MASTERS"]

Mumbai, Oct 12, 2014: Former finance minister P Chidambaram has advocated against lifting of curbs on gold imports, saying the benefits accruing from restrictions would far outweigh problems like spurt in smuggling.

"No. Not in my view," Chidambaram, who initiated these measures as the Finance Minister in the previous UPA regime in the face of a record high current account deficit (CAD), over the weekend when asked whether the time was ripe to withdraw the curbs.

The senior Congress leader was in the city to campaign in Maharashtra Assembly polls.

The CAD, which is the difference between inflow and outflow of foreign exchange, had touched an all-time high of $88.2 billion or 4.8 per cent of GDP in 2012-13.

The high current account deficit had led to the rupee plummeting to its all-time low of 68.80 in August last year.

On concerns like a spurt in smuggling activities, which had otherwise been checked after liberalisation, Chidambaram said the benefits of the gold import curbs are too big.

In wake of the high gold imports affecting current account deficit, the previous government had hiked the import duty on gold three times to 10 per cent and also compelled importers to export a sizeable part of the commodity under the 80:20 rule.

However, during this fiscal, there was some clarification in the 80:20 rule after a massive reduction in CAD.

According to some estimates, 200 tonnes of the precious metal will be imported into the country in the calendar year 2014.

There has been a jump in gold smuggling cases registered by enforcement agencies.

When asked if it is fair to artificially reduce CAD, Chidambaram said, "What else to do? There is no other way. I agree that CAD should be reduced by exports, but it won't happen overnight. Can we afford to spend $50 billion on gold imports? We cant afford it."

Chidambaram agreed that in the long-term, we should focus on pushing exports to reduce CAD but at the moment the country is left will little option.

Talking about international rating agency S&P's outlook upgrade on India, Chidambaram said that this was due to the handsome growth rate of 5.7 per cent in the first quarter.

Courtesy: IBN Live