Economic Survey calls for curb on oil, gold imports

Import duty on gold was hiked to 6%

The pre-Budget Economic Survey on Wednesday laid emphasis on reducing imports of gold and oil, which posed a huge risk to India’s growing current account deficit.

 “The room to increase exports in the short run is limited, the main focus has to be on curbing imports, mainly by making oil prices more market-determined and curbing import of gold to contain current account deficit (CAD),” the Survey said.

 It also suggested making financial saving instruments more attractive to discourage people from investing in gold. The increasing gold rush, according to the Survey, is persistent high inflation and lack of other attractive saving instruments.

"The rising demand for gold is only a 'symptom' of more fundamental problems in the economy.

Curbing inflation, expanding financial inclusion, offering new products such as inflation indexed bonds, and improving saver access to financial products are all of paramount importance," it said.

 The Chief Economic Advisor Raghuram Rajan said that gold and oil were the main contributors to rising CAD.

“The key number that we worry about is the CAD...at over 5 per cent (it) is way too high. In my view 2.5-3 per cent of the GDP is the level we should not exceed," he said.

 The government last month hiked import duty on gold by 2 percentage points to 6 per cent, but the step yielded little results, since gold imports in the same month rose over 15 per cent.

 This has also given rise to the expectation that the government may resort to further hike in gold import duty in the Budget to be presented on Thursday.