India Mulls Gold Import Curbs as Purchases Surge

India, the world's leading gold consumer, is considering imposing restrictions on gold imports by private trading firms, amid rising foreign purchases over the past two months.

Officials from India's central bank and its finance ministry are meeting on 13 November to discuss the policy, local media and Bloomberg reported.

Measures under discussion will curb imports by private trading firms, which started importing gold around June after being barred from doing so for about a year, Reuters reported

Any new limits on imports could increase local premiums to the global benchmark and hit consumer demand.

Reduced Indian gold buying will pressurise global prices, already facing fire from weakening demand in China, the second largest consumer.

Indian Imports

Gold is the second-biggest expense in India's import bill.

October shipments into gold-crazy India jumped to about 150 tonnes, as against 143 tonnes in September and under 25 tonnes in October 2013.

September shipments into India surged 450% year-on-year to $3.75bn (£2.38bn, €3bn), which weighed on the nation's trade deficit.

Third-Quarter Surge

India once again took over as the world's leading gold consumer in the third-quarter, according to the World Gold Council (WGC).

The subcontinent bought 225.1 tonnes of gold jewellery, coins and bars in the quarter ended 30 September as against the 182.7 tonnes bought by China, WGC data showed.

The market development organisation cited confidence in the Indian government, and the weakening of rupee gold prices in September and August, as the reasons behind higher demand in Asia's third-largest economy.

In July, India's finance minister Arun Jaitley said New Delhi will consider easing the nation's tough bullion import curbs once the nation's fiscal situation improves.

The minister said the regime had to be watchful of the nation's current account deficit (CAD) and its fiscal deficit. Higher foreign exchange outflows over inflows trigger a current account deficit.

Easing Restrictions

India's central bank on 21 May eased some gold import restrictions, while also permitting local banks to provide gold loans to jewellers.

The Reserve Bank of India (RBI) permitted leading trading houses to import gold, a decision that afforded permission to over 20 entities, including banks, to import the precious metal.

The resumption of gold loans to the sector, banned in 2013, made it easier for jewellers to finance purchases.

Earlier, in March, the RBI allowed five private sector banks to import gold, a move that marked thefirst step towards easing India's gold import curbs.

The bank allowed HDFC Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank and Yes Bank to import the precious metal, Reuters reported.

The previous Congress Party-led government made three upward revisions to the import duties on gold in 2013, to a record 10%, and rolled out restrictions tying purchases to exports to battle an inflating trade deficit.