India to resume gold imports
New Delhi, September 21, 2013
India will start buying gold again after a two-month gap as the government and banks have agreed how new rules on imports should work, easing prices in the world's biggest bullion buyer and helping supplies just as seasonal demand kicks in.
But monthly shipments by the world's top importer are unlikely to be even a quarter of May's record 162 tonnes to start with and annual imports will be sharply down, helping to cut a bulging current account deficit and support the rupee.
India's gold shipments came to a virtual halt after the Reserve Bank of India told importers on July 22 that a fifth of their purchases would have to be turned around for export and that 80 per cent would be available for domestic use.
"The confusion was mainly about the 80:20 norm. Many people misread this. This means at least 20pc of imported gold must be exported," a trade ministry source said, clarifying the rule, that had been interpreted as limiting supplies for exports to just a fifth of total shipments. "The issue stands resolved now and as a result imports will start immediately," said the source.
Banks and other importers had halted purchases as there was no clarity despite attempts by the central bank and customs authorities to ease confusion. The resulting impasse crimped supply and pushed up domestic prices.
While the government has taken urgent steps to curb imports, increasing duty three times since January 1 to a record 10pc, it wants to boost exports, which had fallen 70pc in July to $441 million, as the flip side of efforts to rein in a current account deficit which hit a record in 2012-13.
About a tonne of gold that was stuck at airports pending customs approval will be released immediately, said Gems and Jewellery Export Promotion Council vice-chairman Pankaj Kumar Parekh.
Domestic jewellers also breathed a sigh of relief as demand is expected to pick up in the next 10-15 days with the arrival of the wedding and festival season, traditional times to give gold. And this year's good monsoon will boost incomes of farmers, who often use gold as an investment.
India imported 47.5 tonnes in July, worth $2.9 billion, but the figure slipped to only $0.65bn in August. Last fiscal year, imports averaged 70 tonnes a month.
India's total gold imports could now be below 750 tonnes in the year to March 2014, Arvind Mayaram, economic affairs secretary at the finance ministry said, about 11pc lower than a year ago.-Reuters