NEW DELHI: The government is in no hurry to reduce the 10% import duty on gold imposed in 2013 to narrow a widening current account deficit (CAD).
The reason is pretty simple: It has helped the government earn Rs 25,000 crore in April-December: This is a windfall gain after the sharp drop in global crude prices, which helped the government save up to Rs 1.5 lakh crore. Collection from the duty on the yellow metal is the top grosser under customs duties.
The CAD is a measure of the value of goods and services a country imports exceeding the value of goods and services it exports. The sharp decline in global crude oil prices has come as a boon for the government and has enabled it to slash its fuel subsidy bill significantly and boosted finances at a time when the economy is passing through a sluggish phase. Both oil and gold have enabled the government to show a better fiscal picture.
"There is no move as of now to reduce gold import duty," a senior finance ministry official told TOI. Hopes of a cut in the duty had risen in the run-up to the 2016-17 Budget, but they were dashed when the government kept it at 10%.
Experts have called for reducing the high import duty on gold, saying it has triggered smuggling of the yellow metal. But officials in the finance ministry downplayed the concerns over gold smuggling, saying it is a "very small amount". They said that gold demand in the country was around 1,100 tonnes and smuggled yellow metal was "insignificant". The government had taken a series of steps to impose the 10% import duty on gold after the CAD widened sharply, which threatened macroeconomic balance.
Since then, the government has taken a series of steps to mobilize gold and keep the CAD within manageable limits.
