Improve exports, move forward, says financial analyst.

Chennai: In hindsight, the literally zero import of gold in the last 40 days might have led to the arrest of the depreciation of the rupee against the dollar in India, but economists say that the country needs to improve its manufacturing output to arrest the fall of the rupee.

“The financial sickness is not because of gold imports. Despite a literal ban on gold imports, there has been no shortage of gold in the market, which means smuggling and hawala activities have been active in this country, where gold holds a prominent place in every household,” said an economist.

“Gold imports are a very small fraction. The ban on non-essential imports like gold, platinum and silver can only strengthen the rupee by 10 or 20 paisa,” said G. Ramachandran, a city-based financial analyst, who added that improving exports is the only way to move forward.

“The rupee has been weakening against the dollar since 2011 and in recent times, the fall has been a little sharp. So this curb on gold imports will not improve the situation,” he added. He said that increasing fuel prices would also be of no use.

“The rupee is only going to fall again from Monday. People will still use motor vehicles and so this price rise will not be effective in restricting the use of petroleum products,” he said, adding that government’s move to allow oil companies to buy dollars directly from the RBI instead of the open market was a positive one.

However, bullion traders and gold retails are upset with government’s recent actions like increasing gold import duty to 10 per cent and imposing a compulsory 20 per cent export obligation on the import of gold.

“Why has the ministry restricted gold imports alone, when it is not the only culprit for current account deficit? No other products like automobile, watches, leather goods, sanitary ware and furniture have been restricted when the same products are manufactured in India.

Most of these products are fully imported but in the case of gold, only the raw material is imported and the final product is manufactured across India by lakhs of artisans,” said Ajay Vummidi of Vummidi Bangaru Srihari Sons.

Source : deccanchronicle.com