RBI for removal of restrictions on gold import

Govt hiked import duty on gold to 10% and the RBI also imposed curbs on its imports by linking it with exports

Advocating removal of restriction on gold import as it encourages smuggling, Reserve Bank today said efforts should be made to maintain the present level of Current Account Deficit (CAD) without any significant curbs on inward shipments.

"I would be much happier if we had the kind of CAD we have without significant curbs on anything, including gold. We should aim to have a CAD without any distortions, removing the incentives for smuggling, that is what we will be working for," he told a press conference here.

CAD, which is the difference between the inflow and outflow of foreign currency, had touched a record high of $88.2 billion or 4.8% of GDP last fiscal.

The government hiked import duty on gold to 10% and the RBI also imposed curbs on its imports by linking it with exports.

With this, the CAD was brought down to 1.2% in the July-September quarter, from 4.9% in Q1.

In the first half, the CAD stood at $26.9 billion (3.1% of GDP), down from $37.9 billion (4.5% of GDP) in H1 of 2012-13.

"At this point, I feel very comfortable with where we are on CAD," Rajan said.

The government and the RBI expect to contain CAD at $56 billion.

On an earlier occasion, the Governor had expressed concern that there was spurt in gold smuggling and was being paid for through the hawala channel.

Government expects gold imports to drop to 500 tonnes in the current fiscal as against 845 tonnes last year on account of measures taken by it along with the RBI.