Bullion imports are expected to fall by about 29 percent this fiscal to USD 44 billion, the Prime Minister Economic Advisory Council said in a report released on Friday.
New Delhi: Bullion imports are expected to fall by about 29 percent this fiscal to USD 44 billion, the Prime Minister Economic Advisory Council said in a report released on Friday.
Besides, PMEAC has emphasised that there is an urgent need to curb the domestic demand for gold by improving the regulatory mechanism for sales of mutual fund and life- insurance products.
"A large decline in the value of imports of bullion (mostly gold) is expected in the course of this year. The first quarter saw a sharp drop by 48 percent. Smaller order of decline is expected in the balance quarters," PMEAC said.
"For 2012-13 as a whole, the value of bullion imports is expected to drop to USD 44 billion - a drop of nearly 29 percent compared to last year and slightly greater than that recorded in 2010-11," it added.
Bullion imports stood at USD 61.5 billion in 2011-12 and USD 42.5 billion in 2010-11.
The government in this year's Budget had raised customs duty on standard gold bars, gold coins of purity exceeding 99.5 percent and platinum from 2 percent to 4 percent. The customs duty on non-standard gold was also increased to 10 percent from 5 percent.
"The rush to gold is a response to the desire to hedge against currency risk and also as a response to the record low interest rates and hence yields on bonds," PMEAC noted.
The Council pointed out that there has been huge increase in gold imports into India for investment use on account of factors such as rising gold prices, high domestic inflation, shortcomings in the marketing of financial saving instruments and poor returns in equity market.
"This factor (jump in gold imports) has contributed to a great extent to the worsening of external payments situation and the availability of financing saving for productive use at home. This entire issue in all of its dimensions has to be squarely addressed by policy," it suggested.
The council linked the jump in demand for gold as an investment vehicle to fall in sales of mutual fund products, particularly to small investors, and negative growth in premium of new private sector life insurance companies.
For improving the Current Account Deficit by cutting gold imports, PMEAC suggested "a quantum improvement in the regulatory context in which mutual funds and life insurance products are sold is of the utmost importance.