India ends 80:20 gold import rule

[DefJam]

India ends 80:20 gold import rule

PUBLISHED : Monday, 01 December, 2014, 4:28am
UPDATED : Monday, 01 December, 2014, 4:28am

Reuters in Mumbai

India has scrapped a rule mandating traders to export 20 per cent of all gold imported into the country.

India has scrapped a rule mandating traders to export 20 per cent of all gold imported into the country - a surprise move that could cut smuggling and raise legal shipments into the world's second-biggest consumer of the metal after China.

Along with a record duty of 10 per cent, India introduced the so-called 80:20 import rule tying imports to exports of jewellery last year to bring down inbound shipments and narrow a record current account deficit.

"It has been decided by the government of India to withdraw the scheme and restrictions placed on import of gold," the Reserve Bank of India said, without giving a reason for the change.

Only days ago there were talks between officials of the Mumbai-based central bank and the finance ministry in New Delhi to bring back curbs on some trading houses following a surge in imports in recent months.

Traders said before Friday's decision that India's gold imports could climb to about 100 tonnes for the third straight month in November as dealers bought heavily on fears of curbs on overseas purchases, especially as the wedding season picked up.

The rule change was a relief to jewellers facing difficulties in sourcing gold.

Bachhraj Bamalwa, director of the All India Gems and Jewellery Trade Federation, said the 80:20 rule was not only encouraging smuggling but was also misused by many traders.

From getting human mules to swallow nuggets to hiding bars in dead cows, smugglers had raised their activity since the curbs.