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India to review gold import policy as October buying soars |
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New Delhi: India, the world's biggest gold user after China, will review bullion import rules after purchases in October jumped to the highest level this fiscal year.
Finance Secretary Rajiv Mehrishi and officials from the government and the Reserve Bank of India (RBI) discussed the issue at a meeting on Friday and will hold more talks either on Saturday, a finance ministry official told reporters in New Delhi, asking not to be identified citing departmental rules.
Imports in October jumped to about 150 metric tonnes, the highest since the beginning of the fiscal year on April 1, from 24.5 tonnes a year earlier, people with knowledge of the matter said on Thursday, asking not to be identified as the information isn't public.
Overseas purchases in the seven months through October surged 44 per cent to about 640 tonnes from 444 tonnes a year earlier, they said.
Demand in India surpassed China for the second straight quarter in the July-September period as buyers thronged jewellery stores ahead of the main gold buying festival of Diwali last month, World Gold Council (WGC) data showed on Thursday.
Imports jumped to 204 tonnes in the third quarter from 91 tonnes a year earlier and total demand gained 39 per cent to 225.1 tonnes, the council said.
"In the meeting, they might look at plugging any loopholes or leakages they find in the current measures," Devendra Pant, chief economist at India Ratings & Research, the local unit of Fitch Ratings, said by phone in Mumbai. "If after that the gold imports continue to remain high, then they may take some additional steps."
Raising taxes
D.S. Malik, a finance ministry spokesman, didn't answer two calls to his mobile phone seeking comment on the gold data.
The government last year raised import taxes three times to 10 per cent and introduced a rule obliging shippers to supply 20 per cent of their cargo to jewelers for re-export. The curbs spurred smuggling, prompting the government to allow more banks and traders this year to import bullion.
While the curbs helped narrow the current-account deficit to $32.4 billion in the financial year ended March 31 from a record $87.8b a year earlier, a 450 per cent jump in bullion imports in September more than doubled the country's trade deficit to $14.25 billion for the month from a year earlier, the Commerce Ministry said on October 14.
"The surge in gold imports has increased the risk of further gold restrictions. Given the recent seasonality, it would be advisable to wait for another month or two of gold import data before re-imposing any restrictions," Nomura economists Sonal Varma and Aman Mohunta said in a note on Thursday. "We see the recent spike in gold imports as largely a one-off, rather than the start of an uptrend."
'Little impact'
Demand over the last five years has been driven by higher rural incomes, which are now starting to moderate and limit consumption, while lower inflation and higher returns on other financial assets may limit investment demand, they said.
Source : timesofoman.com
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