Rajan hints govt may change duty import structure for gold

Hinting that government may change duty structure for gold, Reserve Bank Governor Raghuram Rajan today said the 80:20 import curb was scrapped to remove distortions it was creating in the precious metal trade.
Rajan also asked investors to put their money in financial instruments and not just in gold.
About the controversial 80:20 gold import curbs, put in place in August 2013 to curb high gold inflows that was widening the current account deficit, Rajan said government decided to scrap this scheme as it was creating distortions.
Under this scheme, at least 20 per cent of the imported gold had to be mandatorily exported before bringing in new lots.

While he did not specify what these distortions were, there have been apprehensions that the controversial 80:20 scheme was leading to increased smuggling of gold and giving undue benefits to a select importing entities.
Rajan said the "government decided that it was probably the best decision at this point to scrap this rule", adding there are some requests to change the duty structure and that government will view and take a decision on it.

The then government in 2013 had increased import duty on gold 10 10 per cent.
"There were arguments that while there were distortions, they were small relative to larger effective containment of gold imports, at the same time there was an argument that any distortion is bad and we are at a point where we can end such distortions," the Governor said.

The surprise move came at a time when the industry was actually expecting more curbs on imports of gold, which is seen as an unproductive asset-attracting household savings away from the financial markets.
"The decision to scrap the 80:20 scheme is a reasonable one and let us see how it plays out.