India may adopt new measures to curb gold imports

Leading gold buyer India may clamp fresh controls soon on soaring imports of the precious metal that have widened the country's trade deficit. (AFP/Narinder Nanu)

NEW DELHI: Leading gold buyer India may clamp fresh controls soon on soaring imports of the precious metal that have widened the country's trade deficit, a report said on Tuesday (Nov 18).

Gold imports in October leapt to US$4.17 billion from US$1.09 billion in the year-ago period, trade figures on Monday showed.

"Things are being worked out by the finance ministry and some announcements (restrictions) may come in a day or two," the Press Trust of India news agency quoted a source as saying. Other Indian media carried similar reports.

Indians have been flocking to buy the yellow metal for weddings and the Hindu festival season when it is seen as an auspicious time to purchase gold. The buying spree vaulted the country back into the number-one gold consumer spot globally during the last financial quarter after India fell to second-place behind China.

Indian imports aside from gold were muted, reflecting a still weak economy. But the gold purchases drove the trade deficit to US$13.3 billion in October, up from US$10.6 billion a year earlier, the trade data showed.

India imports around 90 per cent of its gold needs and its 1.2-billion population is estimated to have one of the world's biggest private gold hoards of up to 20,000 tonnes.

Jewellery is also bought as an investment in the form of bars, coins and exchange-traded funds. In India, where inflation is traditionally high, gold is seen as an ultimate safeguard of value.

The previous Congress government raised the duty on gold imports several times in 2013 to a record 10 per cent to ward off a balance-of-payments crisis and made it compulsory to re-export some of the metal.

India's new government, elected in May, relaxed some controls after gold imports fell. But Finance Minister Arun Jaitley last month raised the possibility of new curbs as imports surged. Local media reported that top officials of the finance ministry and the central bank met last week to consider tightening import controls on gold.