Tight controls on gold imports by the Reserve Bank of India and the government seem to be yielding results. Imports of gold for the quarter ended September fell by over 77 per cent in value and 28 per cent in volume, according to finance ministry data.
At 12-15 tonnes, the imports in September are estimated to be much lower than in the same month last year. The overall import bill for the July-September quarter on account of gold will be $2.7 billion as against $11.9 billion in the same period last year. That should help keep the current account deficit under control.
The biggest reason for the sharp fall in imports in the quarter has been the restrictions imposed by the RBI. The central bank had said at least 20 per cent of gold imports should be for export purposes and jewellers could not get any financing for buying gold. Getting gold on lease was also prohibited. Over the last two months, imports were virtually halted as there were several procedural ambiguities, which have been clarified now. Over the past few days, three-four tonnes of gold has been imported.
A jeweller said on the condition of anonymity, "We were still getting gold entering the country through unofficial channels." The industry estimates that during the quarter over 40 tonnes of gold entered the country through unofficial channels as the 10 per cent import duty made the risk worthwhile for smugglers and carriers who bring the metal on someone else's behalf.
Going forward, gold availability for the domestic market could remain limited. An office bearer of the Gem and Jewellery Export Promotion Council said he was expecting 200 tonnes of imports in the next two quarters, of which 20 per cent could be exported back. However, traders say the 10 per cent import duty will keep the attractiveness of smuggling intact.
Even as gold imports have come down, those of silver have been rising sharply. In the whole of the last calendar year, India imported 1,900 tonnes of silver. In the September quarter this year, silver imports have been estimated around 1,500 tonnes. Industry experts say several gold traders have shifted to silver after the restrictions imposed on gold imports.