Opportune time for withdrawal of restrictions on gold: Economic Survey
New Delhi: The country's overall trade performance signals an opportune time for removal of restrictions on gold, says the Economic Survey. "The financial inflows in excess of the financial requirements has helped shore up foreign exchange reserves (USD 328.7 billion at the end of January 2015). These have helped lessen the vulnerability concern that led to serious stress last year," said the Survey for 2014-15 tabled in Parliament today.
In 2013-14, India's trade deficit declined to USD 135.8 billion from a high level of USD 190.3 billion in 2012-13, mainly on account of a decline in the growth of imports even though growth in exports was sluggish at 4.7 per cent.
The decline in imports was attributed to lower growth in oil imports (0.4 per cent) and negative growth in gold and silver imports. Current Account Deficit (CAD), which is the excess of foreign exchange outflows over inflows, touched a historic high of USD 88 billion or 4.7 per cent of GDP in 2012-13, mainly due to high imports of gold and petroleum products. In order to check the rising CAD, the government raised import duty on the yellow metal to 10 per cent, while RBI imposed curbs on import of gold and also laid down various pre-conditions for inward shipments of the precious metal.
The restrictions on imports of the yellow metal led to a rise in cases of gold smuggling which went up in 2013-14 to 2,441. In 2012-13 and 2011-12, the number of such cases stood at 869 and 500 respectively. However, in November last year, easing restrictions on gold imports, Reserve Bank scrapped the controversial 80:20 scheme, according to which at least 20 per cent gold imported had to be mandatorily exported before bringing in new lots.
Gems and jewellery exports contribute about 15 per cent to the country's total outbound shipments. In 2013-14, the exports were to the tune of USD 39.5 billion as against total exports of about USD 312 billion during the fiscal. CAD came down to USD 32.4 billion or 1.7 per cent of GDP in 2013-14
