imports, the trade deficit widened to $147.2 billion in the first nine months of the fiscal, up from $137.3 billion in the same period previous year.
Mayaram said it was difficult to immediately estimate the impact of these measures on CAD, but expressed confidence that gold imports will moderate.
Though the inflation indicator wholesale price index (WPI) had fallen to a three-year low in December 2012 to 7.18%, annual consumer price inflation was still high at 10.56% in December, up from 9.9% in November 2012. Owing to the high inflation, people prefer parking their money in gold, considered one of the safest assets and is thought to be the best hedge against inflation.
Dhirendra Kumar, CEO, Value Research India, told FE: “Currently, people are chasing gold as it is the best-performing class. These measures will result in Rs 15,000-20,000 crore invested in gold ETF not going out of the country. Right now, through ETF, the gold is bought and held in London. Due to these measures these funds will stop going out.”
However, he added: “The increase in import duty is unlikely to dampen the demand of gold. It will at the most will have short term impact.”