By Swansy Afonso - Jun 4, 2013 4:41 PM GMT+0400
India, the world’s biggest consumer of gold, widened curbs on imports to narrow a record current-account deficit after shipments surged in the past two months. The rupee climbed.
The restrictions on overseas purchases by banks on a consignment basis will be expanded to include state-run trading companies and others authorized to directly import gold, the Reserve Bank of India said in a notification on its website. The central bank also tightened financing norms for inbound shipments. The restrictions come after Finance Minister Palaniappan Chidambaram yesterday said the country can’t afford high levels of imports and policies will be reviewed if needed.
Bullion slumped the most in three decades in April, sparking a buying frenzy for coins and jewelry in India and prompting the government to take steps to reduce demand. Imports will decline in the short term, Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation, said by phone from New Delhi.
“This will affect the supply chain and the domestic cost of gold will go up as bankers will charge extra for buying gold,” he said. Premiums paid by jewelers to banks may rise to $6 per ounce to $8 an ounce over the London cash price from $3-$3.5 a week earlier, he said.
Limiting Banks
The central bank on May 13 limited imports by banks on a consignment basis to only those required to meet the genuine needs of exporters in an attempt to rein in the current-account deficit, the broadest measure of trade. The bulk of the imports by the banks before the curbs were on a consignment basis, according to the central bank.
India imported 117 metric tons of gold in April after prices entered a bear market, according to Soni. Purchases were estimated at 162 tons in May, according to the Finance Ministry.
Gold has fallen 16 percent this year on speculation the U.S. Federal Reserve may roll back stimulus. The precious metal plunged 14 percent in the two days through April 15, the biggest such drop since 1983.
“Supply will be more channelized and normalized now,” said Rajesh Mehta, chairman of Rajesh Exports Ltd. (RJEX), India’s biggest gold jewelry exporter. “An unnecessary glut was created in the market because of higher imports, that will ease now.”
The rupee rose 0.6 percent to 56.4525 per dollar in Mumbai today. The shortfall in the current account, the broadest measure of trade, was $32.6 billion in the last quarter of 2012 and is the biggest risk to the $1.9 trillion economy, according to the central bank.
The government today sold inflation-linked bonds for the first time in 15 years, aiming to provide investors with an alternative to gold as a buffer against price gains.
Linkers for 10 billion rupees ($177 million) were auctioned at a real yield of 1.44 percent, the central bank said in a statement.
No comments:
Post a Comment