Indians ride gold price fall to import 162 t in May, as a lonely FM chases CAD goal with advice to banks |
Mumbai, Jun 6 (PTI): The surging imports of gold are unsustainable, Finance Minister P Chidambaram said on Thursday while advising banks to tell customers not to invest in the precious metal. “Banks have a role to play in dampening the enthusiasm for gold...I would urge all banks to please advise their branches that they should not encourage their customers to invest in or buy gold”, he said while addressing the annual general meeting of the Indian Banks' Association (IBA). He pointed out that the monthly average gold import in the current financial year is already 152 tonnes, against 80 tonnes a month last year. The Reserve Bank of India, Chidambaram said, has already “advised banks they should not sell gold coins...I hope a day will come when we regard gold as any other metal, it just shines a little more than copper or bronze.” With the spiralling gold imports putting huge pressure on the current account deficit (CAD), on Thursday the government had increased the import duty on gold to 8 per cent, from 6 per cent earlier. This was the second hike in the duty within six months. The government had last raised the import duty on gold from 4 per cent to 6 per cent in January. Expressing concern over rising CAD, Chidambaram said, “gold imports have been a major contributor of the CAD. With the sharp drop in gold prices, millions were happy. “I am afraid I was not among the millions. I told the (RBI) Governor that the drop in gold prices internationally is a bad news for India. Our fears came true,” he said. Gold imports surged in April and May following fall in prices in the international market. “In April we imported 142 tonnes of gold, in May we imported 162 tonnes of gold. Last year's monthly average was 70 tonnes of gold, this year in the first two months, the average is 152 tonnes of gold,” he said, questioning “how do we sustain? How can we finance these gold imports?” Chidambaram said that in view of the surging gold imports, both the RBI and government had no option but to take stronger measures. In order to check gold import, the RBI had put in place regulations under which gold can be imported on a consignment basis only to meet the genuine demands of jewellery exporters. It has also increased margin money to 100 per cent. The Finance Minister also expressed confidence that India would be able to finance its CAD from foreign investments without touching its reserves. ”I hope that in future also by encouraging foreign investment we will be able to finance the CAD without drawing down on our foreign exchange reserve,” he said. He was also hopeful that with fall in inflation other financial instruments would become attractive and “divert some of the disproportionate attention in gold to fixed income instruments”. Earlier this month, the government came out with the first issue of inflation-indexed bonds, which aims at discouraging gold investments. Chidambaram also asked banks to pass on the benefit of RBI rate cut to borrowers as inflation eases. ”As CPI inflation and deposit rates fall, I would urge Commercial banks to translate monetary policy to retail borrowers and firms through lower lending rates”. The Finance Minister said that both the wholesale price based inflation as well as core inflation have fallen sharply, even though the retail or CPI inflation is still high. ”Food inflation is still elevated, but I hope it will come down with the harvest of rabi crop,” he said. Referring to the decline in the fiscal deficit to 4.9 per cent of GDP in 2012-13, he said “it will be quite easy to achieve the fiscal deficit (target) of 4.8 per cent in 2013-14. We will have to be better than what we have targeted”. The minister, however said to bring down the deficit, government will not resort to expenditure compression. He said the finance ministry has asked other ministries to get approvals for their budgeted expenditures in the first quarter itself. Referring to the Cabinet Committee on Investment (CCI), Chidambaram said the high level body would speed up stalled projects in the coming quarters and this would revive investments. “We need to do a lot more to revive investment. The CCI in its four months has cleared projects worth 1.3 per cent of GDP,” he said. In wake of the “low” 4.8 per cent GDP growth in March quarter of the last fiscal, Chidambaram said the decline in growth should be seen in the context of fiscal tightening in the second half of 2012-13. |
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You don't get it, PC. Indian mothers do not trust SoniaG UPA to manage the financial system.
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