India’s gold imports by value could reach $100 billion by 2015-16 if the government does not monitor inflows more strictly, warned the Associated Chambers of Commerce and Industry of India (ASSOCHAM).
India’s recent 2012 budget proposed that the customs duty on gold imports be raised from 2 percent to 4 percent. ASSOCHAM explained that this would not be enough to control the trade. Every ounce of imported gold means that India’s savings flow out to other countries and create jobs there, the group said.
India’s annual gold production is around two tonnes while the country imports around 900 tonnes. Being the largest importer of gold in the world, India accounts for nearly one-third of the annual demand. Imports by value have increased from $4.1 billion in 2001-02 to $33.8 billion in 2010-11 due to higher prices and rising demand in the country.
At these levels, gold imports are a huge burden on the balance of payments and accentuates the current account deficit, ASSOCHAM explained.
“As gold imports become unsustainable and cause strain on the balance of payments besides affecting exchange rate, the government should undertake extensive education campaigns and encourage channelizing savings in formal financial instruments to increase productive capacity of the economy,” said D.S. Rawat, ASSOCHAM’s secretary general.