P Chidambaram advises against lifting curbs on gold imports

Mumbai: Former finance minister P Chidambaram has advocated against lifting of curbs on gold imports, saying the benefits accruing from restrictions would far outweigh problems like spurt in smuggling.

"No. Not in my view," Chidambaram, who initiated these measures as the Finance Minister in the previous UPA regime in the face of a record high current account deficit (CAD), over the weekend when asked whether the time was ripe to withdraw the curbs.

The senior Congress leader was in the city to campaign in Maharashtra Assembly polls.

The CAD, which is the difference between inflow and outflow of foreign exchange, had touched an all-time high of $88.2 billion or 4.8 per cent of GDP in 2012-13.

The high current account deficit had led to the rupee plummeting to its all-time low of 68.80 in August last year.

On concerns like a spurt in smuggling activities, which had otherwise been checked after liberalisation, Chidambaram said the benefits of the gold import curbs are too big.

In wake of the high gold imports affecting current account deficit, the previous government had hiked the import duty on gold three times to 10 per cent and also compelled importers to export a sizeable part of the commodity under the 80:20 rule.

However, during this fiscal, there was some clarification in the 80:20 rule after a massive reduction in CAD.

According to some estimates, 200 tonnes of the precious metal will be imported into the country in the calendar year 2014.

There has been a jump in gold smuggling cases registered by enforcement agencies.

When asked if it is fair to artificially reduce CAD, Chidambaram said, "What else to do? There is no other way. I agree that CAD should be reduced by exports, but it won't happen overnight. Can we afford to spend $50 billion on gold imports? We cant afford it."

Chidambaram agreed that in the long-term, we should focus on pushing exports to reduce CAD but at the moment the country is left will little option.

Talking about international rating agency S&P's outlook upgrade on India, Chidambaram said that this was due to the handsome growth rate of 5.7 per cent in the first quarter.