India’s gold import bill is estimated to have more than tripled during the month of October. The total gold imports during the month are likely to cross 90 tons, thereby lifting the bill to whopping $3.5 billion. The imports during October last year had totaled 38 tons, which had amounted to $1.01 billion.
According to trade sources, star and premium trading houses imported higher quantities of gold in anticipation of increased gold demand ahead of festive and wedding season. The rumors that Indian government may place more import restrictions on gold also fuelled higher purchases during the month. Incidentally, silver imports too have jumped significantly during the past two months, averaging at nearly 700 tons per month.
Meanwhile, skyrocketing gold import bills have taken the government by surprise. Traders foresee the possibility of government further tightening the existing gold import norms.
As a first step, the Director General of Foreign Trade (DGFT) has proposed to reserve 20% of the domestic quota of imported gold to small and marginal players. Also, 20% of the gold meant for export will be reserved to small exporters. The DGFT has requested all importing agency to announce import on their website. The reserve quota should be kept open for a specific period. The agencies are allowed to sell this gold to others only if the gold is not picked by small jewelers.
Official sources close to Finance Ministry pointed out that a proposal to wipe out the disparity in gold import norms between trading houses and banks is also under consideration of the government. Currently, fresh imports by trading houses are dependent on the quantity of gold imported in the past, whereas banks are allowed to import five times the quantity of gold supplied to exporters in the past.