Union Finance Minister P Chidambaram on Wednesday said the government is considering increasing import duty of gold, in order to curb high gold imports.
Chidambaram said that the huge demand for gold is one of the key reasons for the widening Current Account Deficit (CAD), and an easy way to reduce that would be to hike the import duty of gold, which would push up the domestic price of gold.
"Demand for gold must be moderated. We may be left with no choice but to make it more expensive to import gold. The matter is under government consideration," said Chidambaram.
The CAD, which represents the difference between exports and imports after considering cash remittances and payment, widened to a record high of 5.4 percent of GDP in the July-September quarter.
For the entire 2011-12 fiscal, gold imports stood at USD 56.2 billion. The decline was mainly on account of increase in customs duty on gold imports by government in January and March 2012.
Chidambaram expressed confidence that Centre can finance the CAD even if it is slightly higher than the last year without drawing upon foreign exchange reserves.
Currently, the government is also making efforts to channelise investor money into equities and other financial instruments to reduce demand for the yellow metal. (ANI)