Govt rules out further duty hike on gold imports
New Delhi: With dip in gold imports, government on Thursday ruled out any further hike in customs duty and said economic indicators like CAD will improve drastically if Indians do not import it for a year.
"I don't want to become too unpopular," Chidambaram said when asked if the government was mulling further duty hike.
Chidambaram's statement comes in the backdrop of decline in gold imports in the last few weeks.
"Net gold imports, averaged USD 135 million a day, in first 13 business day in May till May 20. However, in the subsequent 14 business days, it averaged only USD 36 million, so gold imports have sharply come down. But I would be happy if they come down even further," he said.
Huge gold imports have put pressure on the country's Current Account Deficit (CAD), which in turn is affecting the value of rupee.
The government has hiked import duty to 8 percent recently to curb gold demand. The Reserve Bank has put restrictions on banks on importing gold.
Pointing out that there are other financial instruments which provide better returns than gold, Chidambaram urged people not to invest in gold.
"Suppose people of India don't import gold for one year, the whole situation will dramatically change. If we can have it for six months, one year, it will dramatically change the situation of CAD. And we will see its positive impact on every other index that measures the economy-- stock market, exchange rates, interest rates," Chidambaram said.
The Finance Minister said people who want to buy gold must realise that every ounce of the precious metal is imported and no gold is manufactured in India.
"You give rupee, we have to provide a dollar. You think you buy gold in rupees but actually you buy gold in dollars. I would once again appeal to everyone please resist temptation to buy gold," he added.
He said there are many products in "which yields, returns are very attractive".
"Inflation index bonds are now available and more will be available. These are linked to inflation where capital is well-protected," Chidambaram said.
The Minister further said he does not buy gold but invest in financial instruments.
"I don't buy gold and I put in my savings in financial instruments and I am quite happy with the returns. To think that gold is the safest investment is wrong," he said.
Chidambaram said people who have invested in gold when the price was high have taken a hit.
"...People who are financially well-informed should put their savings in financial instruments and other savings instruments rather than gold," he added.
Stating that fall in gold imports has resulted in a pick up in deposit growths in banks, he said," If I have one wish which people of India can fulfil that is do not buy gold".