Govt plans gold import duty hike to trim CAD
"As would be evident, gold imports constituted a substantial chunk of the imports and is a huge drain on the current account. Suppose gold imports had been one half of the actual level, that would have meant that our foreign exchange reserves would have increased by $10.5 billion. I would, therefore, appeal to the people to moderate the demand for gold, which leads to large imports of gold. I may add that we may be left with no choice but to make it a little more expensive to import gold. This matter is under the government’s consideration," Chidambaram said on Wednesday.
"I am confident that even if the year ends with a slightly larger CAD than last year, we would be able to finance the CAD without drawing upon reserves," he added.
Prime Minister Economic Advisory Council chairman C Rangarajan also said: "One of the approaches (to curb the CAD) is to to look at increasing the import duty on gold."
The plan to hike the import duty again from the current 4%, which has effectively been raised four fold since last January, reflects the government's growing uneasiness over large imports of an idle commodity-— unlike crude oil— worsening its current account, which comprises the balance of trade,
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