NEW DELHI – There are growing concerns over gold imports and the consequent impact on ballooning current account deficit and locking up savings in unproductive avenues.
The Associated Chambers of Commerce & Industry of India (Assocham) in a study has pointed out that gold imports are unsustainable and savings need to be diverted to other financial instruments.
The finance ministry recently raised import duties on gold and silver to make them more expensive but, given India’s love affair with gold and as a time tested instrument of savings, especially in rural areas, deterring gold consumption is neither a popular move nor easy.
The new rates on ad valorem basis – 2 per cent on 10 grams of gold and 6 per cent on one kilogram of silver – mean importers will have to pay double the duty.
Being the world’s largest gold importer, India accounts for nearly one-third of annual demand with import bill rising from US $4.1 billion in fiscal 2001-02 to $33.8 billion in 2010-11.
The Assocham study says at these levels, gold imports are a huge burden on the balance of payments and accentuates the current account deficit. On the other hand, it represents a massive strain on investable resources and weaning away domestic savings from gold assume importance as gold does not add much to the productive capacity of an economy.
