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Sharp fall in India's gold imports
Oct 31, 2013

One of the major challenges facing the Indian economy has been the high current account deficit (CAD). This has resulted in substantial downward pressure on the Indian rupee. Under pressure, policymakers turned hostile towards India's obsession with the precious yellow metal. Between January 2012 and August 2013, the import duty on gold was raised from 2% to 10%. Further the Reserve Bank of India imposed a ban on imports of gold coins and medallions in a bid to tame the rising CAD. This ban resulted in a substantial drop in gold imports.

As the chart of the days shows, from 140-160 tonnes during the months of April and May 2013, gold imports have fallen sharply to about 11-12 tonnes during the months of August and September. One important point to remember is that while legal gold imports have fallen, this has resulted in a significant rise in gold smuggling. This is a major challenge for policymakers as it makes the curbs on gold imports futile but also results in revenue losses for the exchequer.

Data source: Business Standard

This Chart Of The Day was published in The 5 Minute WrapUp - What you should learn from successful investors?

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1 Responses to "Sharp fall in India's gold imports"

K Krishnamurthy

Oct 31, 2013

Indian individuals have traditionally been the highest consumers (holders)of gold in the world for decades. How can this sentiment change drastically in a span of just 3 of 4 months to such an extent that the import in Aug- Sep is just around 7% of May 2013? This does not add up. The stats seem to be skewed for some reason.

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