India soon to reopen gold imports but there’s no hurry

India will soon resume buying gold from overseas after a two-month gap as the government and banks have settled on how new rules on imports must work.

India will soon resume buying gold from overseas after a two-month gap as the government and banks have settled on how new rules on imports must work, lessening prices in the world’s major yellow metal buyer and easing supplies just as seasonal demand kicks off.

But monthly consignments by the world’s top importer are not expected to be even a part of May’s record 162 tonnes to start with and yearly imports will be roughly down, helping to bring down the swollen current account deficit and hold up the rupee.

India’s bullion imports came to a near pause after the Reserve Bank of India informed importers on July 22 that a fifth of their purchases would be twisted around for export and 80 percent would be available for domestic use.

According to news reports, a trade ministry source explained the rule that had been interpreted as limiting supplies for exports to just a fifth of total shipments, said “the confusion was mainly about the 80:20 norm. Many people misread this. It meant that at least 20 percent of imported gold must be exported. The issue stands resolved now and as a result imports will start immediately.”

Banks and other importers had paused purchases as there was no lucidity regardless of efforts by the RBI and customs authorities to simplify the perplexity. The consequential stalemate screwed supply and the domestic prices jumped high.

While the government has taken immediate steps to limit imports by raising duty three times since January 1 to a record 10 percent with an endeavour to boost exports, which had dropped 70 percent in July to $441 million, as the flip side of attempts to control a current account deficit which hit a record in 2012-13.

Bullion industry leaders said about a tonne of gold that was stuck at airports awaiting customs approval will be released instantly and this decision will boost the morale of the export industry. Exports generally sum only about 60-70 tonnes per year and vie for markets from the Middle East to the United States with jewellery from Thailand and Turkey.

Even the domestic jewellers breathed a sigh of relief as demand is likely to gain speed in the coming 15 days with the beginning of the wedding and festive season, which is usually the traditional times to gift gold. And a good monsoon this year will advance profits of farmers, who habitually use gold as an investment option.

But imports will be monitored by the link to exports and even after Friday’s elucidation; it will probably take a while to really kick start.

Reportedly, India imported 47.5 tonnes in July, worth $2.9 billion, but this figure slipped down to only $0.65 billion in August. Numbers for August are not yet available. Last fiscal year, imports averaged 70 tonnes a month.

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