New Delhi/Mumbai: India is not considering an immediate cut in gold import duties, Trade Minister Nirmala Sitharaman said on Wednesday, extending a policy that has helped narrow the country`s trade deficit but is believed to have led to an increase in smuggling.
India`s trade and current account deficits have narrowed sharply since New Delhi raised the duty on gold imports to 10 percent from 2 percent through a series of steps last year, helping revive confidence in the country`s economy.
But the duties have also fuelled a belief that smuggling has surged, causing some suspicions about distorted data and raising expectations the government will ease some of its restrictions.
"Yes, the current account deficit has come down. But immediately, there is no plan to reduce import duty," Trade Minister Nirmala Sitharaman told reporters.
"I cannot say whether gold smuggling has increased because of hike in import duty," she added in reply to a question.
India will maintain the import duty just as the country is about to enter the key festival period, which traditionally leads to a surge in demand for gold that are given out as gifts.
Although the move at first caused gold prices to rise, they have fallen this year due to a decline in global markets and a stronger rupee.
Still, many suspect more gold is being imported illegally, even though the central bank has watered down some of the tough restrictions on gold shipments, including allowing more private agencies to import the gold.
That has led to some doubt over whether India`s trade data accurately reflects shipments. Recent data showed gold imports more than halved to $7 billion in the April-June quarter from $16.5 billion in the same quarter a year ago.
As a result, India`s current account deficit narrowed to 1.7 percent of the gross domestic product in the June quarter from a record 4.8 percent a year ago.
Investors have been overly concerned about whether smuggling is distorting the data.
Strong foreign buying helped send shares to record highs this month, while the rupee is up 13 percent since its record low in late August last year, fuelled in a large part by hopes the new government will usher a period of economic reforms.
"At this point, we don`t foresee the cut in import duty happening in the ongoing fiscal year," said Shubhada Rao, chief economist of Yes Bank in Mumbai.
