FM Jaitley scores one against current account deficit as gold imports fall 62 per cent.

KOLKATA: Surge in imports had widened trade deficit to a 11-month high in June, but better nos seen in July
There is some good news in store for the finance minister Arun Jaitley, who was facing the crucial task of keeping current account deficit under control.

Gold import has dropped by 62 per cent in the period April to June compared to Q1 of FY 14 to 127 tonne. The drop in imports continues in July , with industry expecting that Q2 imports will be in line with the first quarter.

Talking to ET, Haresh Soni, chairman of All India Gem & Jewellery Trade Federation (GJF), said: "There has been a drop in gold demand by 30-40 per cent. In June, imports had picked up to 52 tonne in view of the India International Jewellery Show (IIJS). But this trend is unlikely to continue in next quarter as well."
In fact, a surge in gold imports widened India's trade deficit to a 11-month high in June, adding to the uncertainty from global oil prices that could pile more pressure on its current account balance. The trade deficit swelled to $11.76 billion last month, its highest level since July 2013.

"Had the government reduced the import duty on gold from 10 per cent to 2 per cent, then there would have been a sudden increase in gold demand leading to higher imports in July. But that did not happen as the finance minister did not announce any breather for gold in the Budget.

Therefore, July imports will be hardly around 30 tonne, thus easing the tension of the government over widened current account deficit," said Amit Sampat, di rector, Pushpak Bullion. Gold price on Monday was hovering around Rs 28, 500 per 10 gm.

The ongoing IIJS, for which the importers had stocked gold during June, though has evoked interest among domestic jewellers but has not created much noise among international buyers.

"The demand is comparable to last year. The domestic buyers have shown a lot of interest," said Vipul Shah, chairman, Gem & Jewellery Export Promotion Council.

However, former GJF chairman Bachhraj Bamalwa said: "The mood is good but not encouraging. There is hardly any interest from overseas buyers. Moreover, IIJS has been held 20 days earlier as Diwali is earlier this year. May be that has left some impact also."

Despite a muted demand, industry fears that even though imports through the official route is likely to be less in July to September quarter, gold might enter India through the unofficial route.

Source : economictimes.indiatimes.com