Gold News

India "Eases" Gold Import Rules as Modi Victory Looms

Gold import licenses apparently granted to 5 banks to ease supplies as national elections begin...
 
GOLD IMPORT rules in India, former No.1 consumer nation, are being eased ahead of the national elections starting in April, according to local press.
 
Tightened since early 2012, when gold duty began rising from 1% by value to 10% today, India's import rules require one-fifth of new shipments to re-exported.
 
This so-called 80:20 rule caused such confusion when imposed in summer 2013, it effectively shut legal gold imports to India, then on track for a record year.
 
Spurring a surge in illegal flows, the 80:20 rule slashed the number of companies eligible to apply for gold import licenses. Because a potential importer had to show it had helped export gold sometime in the previous 3 years.
 
With a little over 3 weeks until national ballots begin, five other banks have now been allowed to apply for gold import licenses, says Reuters, almost doubling the number of potential suppliers.
 
"They have decided on [import] limits depending on the number of customers you have for exports," says Shekhar Bhandari, a senior executive at one of the banks named, Kotak Mahindra, and a long-standing advocate of India's huge gold industry – which directly employs perhaps 1.2 million people – assisting the current Congress government in trying to reduce gold bullion imports.
 
Opposition BJP leader Narendra Modi last September gave his support to jewelry manufacturers and retailers demanding easier rules, winning the support in return of trade body the Bombay Bullion Association (now the the India Bullion and Jewellers Association).
 
The Congress government says its anti-gold import rules have helped slash India's currenct account deficit (the gap between its financial inflows and outflows) from $88 billion in 2012-13 to $45bn this fiscal year.
 
But some estimates of illegal "gray market" supplies would add 20% to that deficit. Customs officials in Bengal seized 98 kilos of smuggled gold last week alone.
 
"Modi has said that any action on gold should look at the interests of the public and traders," says the Times of India, "not just economics and policy."
 
"The new government, likely to be led by Modi," says a separate report from global credit-ratings agency Moody's, "offers a chance for better governance."

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