A Timeline Of India’s Efforts To Curb Gold Imports

India’s gold imports rose to $2.9 billion in July from $2.45 billion in June. Dealers in Singapore said they have seen an increase in buying from Indian dealers and jewellers since last week’s hike in import duty to 10% but, they were not sure if it was entering India through legal means. Gold forms an essential part of a bride’s dowry in India and is considered auspicious as a gift or offering at religious festivals. The more the government tries to curb Indian gold consumption, the more likely a black market will occur as there will always be a demand for gold in India.

To cut its import bill, India has tightened rules to curb gold demand, increased gold import duty thrice in eight months to a record 10%, and banned imports of Gold coins and medallions. Analysts have said the moves may curb imports but not demand which is at heightened levels due to a fall in gold prices, and could prompt an increase in local premiums and smuggling. Gold imports are a big contributor to India’s record trade deficit, so the central bank – RBI and the government is trying to slow them down.

Here is a timeline of the Indian government’s efforts to curb Gold Imports:

India, the world’s top gold buyer, has taken a series of measures this year to curb demand for bullion - its second-biggest import after oil – as it looks to reduce its record trade deficit.

Following are the measures taken by the central bank and the government in 2013:

Jan 21 – The federal government raises gold import duty by 2% to 6%.

Jan 22 – The federal government more than doubles duty on raw gold to 5%.

Jan 30 - Finance Minister P. Chidambaram says no plans for additional taxes or curbs on gold imports.

Feb 1 – India’s central bank plans to introduce three to four gold-linked products in the next few months.

Feb 6 – India’s central bank says it would consider imposing value and quantity restrictions on gold imports by banks.

Feb 14 – The Reserve Bank of India relaxes rules on gold deposit schemes offered by banks by allowing lenders to offer the products with shorter maturities.

Feb 20 – India’s trade ministry recommends suspending cheaper gold jewellery imports from Thailand.

Feb 28 – India keeps its gold import duty unchanged in its annual national budget, defying industry expectations.

Feb 28 – India proposes a transaction tax of 0.01% on non-agricultural futures contracts including precious metals.

March 1 – India’s finance minister appeals to people not to buy so much gold.

March 18 – The Reserve Bank of India says it is examining banks that sell gold coins and wealth management products to identify “systemic issues”, with a view to closing any legal loopholes.

April 2 – Finance Minister suggests unlikely to raise the import tax on gold further to avoid smuggling and would instead introduce inflation-indexed instruments.

May 3 – India’s central bank restricts the import of gold on a consignment basis by banks.

June 3 – Finance minister says India cannot afford high levels of gold imports and may review its import policy.

June 5 – India hikes gold import duty by a third to 8%.

June 21 – Reliance Capital halts gold sales and investments in its gold-backed funds.

June 24 – India’s biggest jewellers’ association asks members to stop selling gold bars and coins, about 35% of their business.

July 10 – India’s jewellers could continue a voluntary ban on sales of gold coins and bars for six months.

July 22 – India’s central bank moves to tighten gold imports again, making them dependent on export volumes, but offers relief to domestic sellers by lifting restrictions on credit deals.

July 31 – India hopes to contain gold imports well below 845 tonnes that were shipped last year, Finance Minister says.

Aug 13 – India hikes import duty on gold for a third time in 2013 to 10%. Duties for silver and platinum also increased to 10%. Customs duty on gold dore bars, ore or concentrate increased to 8% from 6%.

Aug 14 – India turns the screws on gold buying again, banning imports of coins and medallions and making domestic buyers pay cash.

Indian traders stopped imports on July 22 due to confusion over a rule issued by the Reserve Bank of India that was aimed at stemming the flow of gold into the country, not stopping it completely. The confusion centered on a rule that required importers to re-export at least 20% of all imports, known as the 80/20 rule. Last week, the Reserve Bank issued detailed guidelines on how the rule would work, but the complexity of the rule had prevented banks from importing immediately. Banks are the main importing agencies for gold into India. Since the rule is new, the importing agencies are taking time to get a grasp on the many operational procedures involved, including the undertaking that needs to be submitted to the customs department once the goods are delivered to an exporter for the next lot of imports. ”From operational or concept point of view the RBI circular is very clear. We would take at least a minimum of 10 days to start importing again,” said an official with foreign bank importing bullion in Mumbai.