The government will announce measures to curb a surge in gold imports in a day or two after India's gold imports surged in October four-fold to 106.3 tonnes, valued at around $4.2 billion, which pushed up the country's trade deficit and raised concerns over its delicate foreign exchange position.
Finance ministry source said the government is looking at imposing fresh restrictions on gold, which could include restrictions on a group of private trading firms that have been allowed to bring in the precious metal.
''Gold imports jumped to 106.3 tonnes ($4.2 billion) in October - the highest monthly imports this fiscal year, from 26 tonnes ($1.1 billion) a year ago. Higher demand spurred by the festive season and low prices (Rs1,222.5/troy ounce vis-a-vis Rs1,316.2/troy ounce a year ago) is likely to have led to the rise in imports of the yellow metal,'' it said.
Oil imports constitute nearly one-third of India's total merchandise imports. Therefore, lower oil prices will significantly bring down total imports.
But, while lower oil prices were widely expected to keep India's import bill under check, a relaxation in restrictions on gold imports has only helped to widen the country's current account deficit (CAD).
Rating agency Crisil Research has projected oil prices to average $100-105 per barrel (Brent) in FY15, but the recent fall has helped India's state-run oil marketing companies to post profit. While India's oil burden eased a bit, the government will now have to face the surge in gold imports, fuelled by a rise in domestic demand.
''Despite the expected widening in CAD in Q2, we forecast for India's CAD at $32 billion (1.5 per cent of GDP) for FY15, similar to FY14,'' CRISIL stated.
Officials from the finance ministry and Reserve Bank of India (RBI) were considering whether to reimpose import restrictions on "star trading houses" that were eased earlier this year, the source said.
There was no announcement by the government or the RBI as a meeting of officials of the finance ministry and the RBI last Thursday failed to reach any decisions.
The government and the RBI imposed restrictions on gold imports in early 2013 as India built up a huge trade deficit that threatened a balance of payments crisis that was exacerbated by the US Federal Reserve's announcement of winding down its programme of quantitative easing.
While the government raised import duty on gold to a record 10 per cent, the RBI introduced a rule making it mandatory to re-export a fifth of all bullion imported into the country.
The measures helped reduce the country's current account deficit, which fell to 1.7 per cent of gross domestic product in the quarter ended 30 June 2014, down two-thirds from a year earlier.
However, the government's curbs led to a surge in gold smuggling, which forced the government to relax import curbs, and in May, it allowed private jewellery exporters with `Star Trading House'' status to import gold.
India's merchandise imports rose 3.62 per cent year-on-year to $39.45 billion in October 2014, up from $38.07 billion during October 2013 while its exports contracted by 5.04 per cent during October 2014 to $26.09 billion from $27.48 billion during October 2013.
Trade deficit during October rose to $13.35 billion from $10.59 billion a year ago. The deficit was higher at $14.25 billion in September.