Restrictions On Gold Imports To Continue As India Combat Current Account Deficit

India’s trade deficit narrowed in January, thanks to the country’s strict import controls on gold imports. But analysts are warning that even though the figures are less alarming, now is not the time to let bullion back in.

The Reserve Bank of India (RBI) imposed tough rules on gold imports last year in an attempt to tackle the country’s crippling current account deficit.

India was among many of the emerging markets that saw their currencies get battered when the U.S. Federal Reserve first floated the idea of tapering its quantitative easing program last summer.

The country’s record current account deficit, which showed a $87.8 billion shortfall, in the previous fiscal year to March 2013, had caused the Indian currency’s dramatic fall.

To correct the rupee’s fall , and improve the country’s balance of trade, RBI governor Raghuram Rajan imposed import controls on gold. And it looks as though it has worked: Figures from the Indian trade ministry on Tuesday showed that the trade deficit fell from $10.14 billion in December to $9.92 billion last month, helped by a 77 percent fall in gold and silver imports.

CNBC

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