According to Commerce Ministry, gold imports which have a bearing on the country’s current account deficit (CAD) fell 14.23% to $28.2billion during 2019-20, while Imports of the yellow metal stood at $32.91billion in the year 2018-19.
Current Account Deficit
Current account deficit refers to when a country incurs more expenditure on imports as compared to what it earns through its export services. It is the difference between inflow and outflow of foreign exchange. According to Reserve Bank’s Data, CAD narrowed to 0.9 per cent of gross domestic product (GDP) or $6.3 billion in July-September 2019, from 2.9 per cent of GDP or $19 billion in the corresponding period last year.
India has been the largest importer of gold mainly catering to the demand of the jewellery industry. The country is said to be importing 800-900 tonnes of gold annually.
Gold imports growth has been recorded negative since December 2019.
It is been said that the decline in gold imports has helped in narrowing the country’s trade deficit to $ 152.88 billion during the last fiscal, as against $ 184 billion a year ago.
To mitigate the negative impact of gold imports on the trade deficit and CAD the government has increased the import duty from 10percent to 12.5percent.