The Reserve Bank of India (RBI) moved to tighten gold imports again on Monday, making them dependent on export volumes with an eye to reducing a record current account deficit, but offered relief to domestic sellers by lifting restrictions on credit deals.
The RBI and the government have taken measures to curb the rampant demand for gold, which makes India the world's biggest buyer and sent May imports to a record 162 tonnes as people took advantage of falling prices.
June imports fell back to 31.5 tonnes, but in a sign the authorities remain anxious ahead of traditional times for buying gold, the central bank said 20 percent of imports must be used for overseas sales - giving exporters guaranteed supplies.
It also included dore, or unrefined gold, for the first time in its restrictions, clamping down on a loophole in import duty which was hiked to 8 percent but currently only on refined gold.
"This will make our life miserable, these are indirect ways of restrictions on imports (for domestic jewellers)," said Haresh Soni, chairman of All India Gems and Jewellery Trade Federation, which has more than 40,000 members.
The RBI said importers need to retain 20 percent of the gold they import in customs-bonded warehouses, and will only be able to buy in more after exports equivalent to 75 percent of the retained amount have been shipped.
The moves were to "rationalize the import of gold in any form," the bank said.
Exporters should benefit from the measures as supplies will now be guaranteed from any imports, said Pankaj Kumar Parekh, vice-chairman of the Gems and Jewellery Export Promotion Council, which has 5,000 members.
"This will be better than stopping imports (altogether), (but) this will reduce domestic supply," said Parekh.
Soni said imports would "definitely" decrease by as much as 30 percent in the fiscal year to March 31, 2014.
Last month, the RBI had ruled out any credit transactions for imports unless they were intended to make jewellery for export, as it looks to rein in a record current account deficit.
But on Monday, it said in its statement that "the extant instructions, as regards import of gold on consignment basis ... stand withdrawn."
India's current account deficit hit a record high 4.8 percent of gross domestic product in the fiscal year that ended in March, fuelled in part by rising imports of gold, which are second only to oil in the country's shopping basket.
Gems and jewellery account for 16 percent of total merchandise exports.