With restrictions on gold imports leading to rise in smuggling, Commerce and Industry Minister Nirmala Sitharaman has pitched for relaxing gold import duty as it is ‘badly’ hurting the gems and jewellery industry.
“As a Commerce Minister, I would want the gold restrictions to go away because gems and jewellery industry have been worried that a sector which is potentially so powerful is suffering because of the gold import policy,” she said.
The minister said that gems and jewellery industry contributes significantly to the country’s total exports.
Gems and jewellery exports contribute about 15 per cent to the country’s total outbound shipments. In 2013-14, the exports were to the tune of USD 39.5 billion while India’s total exports aggregated at about USD 312 billion.
She said that restrictions are not only hurting the industry but has also led to spurt in smuggling of the precious metal.
“Gold policy which was brought in for some other purpose because you want to contain growing CAD (current account deficit) but that hurts industry very badly. We have been telling that to the Finance Minister,” she added.
She said that restrictions may have had impact on CAD but “it has also brought back the horrible days of smuggling of gold.”
The cases of gold smuggling had gone up in 2013-14 to 2,441. In 2012-13 and 2011-12, the number of such cases stood at 869 and 500 respectively.
Sitharaman expressed hope that once the CAD enters into comfort zone, the Finance Minister may want to reconsider relaxing the import norms.
CAD, which is the excess of foreign exchange outflows over inflows, touched a historic high of USD 88 billion or 4.7 per cent of GDP in 2012-13, mainly due to rising imports of gold and petroleum products.
In order to check the rising CAD, the government raised import duty on the yellow metal to 10 per cent, while RBI imposed curbs on import of gold and also laid down various pre-conditions for inward shipments of the precious metal.
CAD came down to USD 32.4 billion or 1.7 per cent of GDP in 2013-14.
The RBI in May had eased gold import norms by allowing select trading houses, in addition to already permitted banks, to procure the precious metal to boost exports.