No move on gold import restrictions, but India mulls mining revival
Apart from the famed Kolar Gold Fields, there are about 40 mines where prospecting has been done, and 16 other gold mines that could be developed
Posted: Monday , 30 Dec 2013
MUMBAI (MINEWEB) -
Though the Reserve Bank of India has said the country is ready for the US Federal Reserve’s tapering, and has pegged the current account deficit (CAD) at below 3% for this fiscal, in its eighth Financial Stability Report released on Monday afternoon, Finance Minister P Chidambaram insisted on making a case for continuing the restriction on gold imports a few hours later, just in case hopes were raised that the low CAD could bring down gold import curbs. Chidambaram also suggested that attempts should be made to discover more gold in the country, rather than rely on expensive imports.
On December 29, Nitin Gadkari, former president of the main opposition party the BJP, came down heavily on the government and said that its flawed policy had forced India to shell out $969 million (Rs 60 billion) for importing gold.
At a seminar by the Institute of Chartered Accountants of India, Gadkari pointed out that as many as 16 gold mines could be developed within the country, which could lead to a major saving on imports.
Stating that a majority of the gold mines were in Karnataka, Gadkari said that though the area has deposits of copper, tungsten and silver along with gold, India did not have the technology to extract the precious metal. He added that there were some prospective reserves in Vidarbha, Maharashtra too, especially in the Sakoli and Bhiwapur districts.
Chidambaram, too, made a mention of the closed mines. Alluding to a recent Supreme Court judgement on the auction of closed mines, he said the Mines Ministry should sell the closed mines, since many people around the world have met him and asked for the mines, to extract gold.
Notwithstanding the likelihood of CAD narrowing to less than $50 billion, the finance minister termed restraining gold imports the correct move.
The Indian authorities have acted on multiple fronts, other than curbing gold imports. They have opened currency swap windows to get fresh dollar flows, and increased money market rates to reduce speculation. All of these have resulted in CAD sliding to 1.2% of the GDP in Q2, and exchange reserves rallying for six weeks till mid December at over $295 billion, as of last week.
The biggest leveller, of course, has been a drastic fall in gold imports and the $34 billion that RBI could gross by way of the two dollar swap windows.
The central bank has said the delay in the tapering of the $85 billion a month bond buyback programme by the US Fed has given India time to replenish its forex reserves and rein in the high CAD. CAD had shot up to an all time high of 4.8% last year on account of a heavy trade deficit and higher gold imports.
In the third week of December, the US Fed announced that it would cut back bond buying by $10 billion a month to $75 billion from January, on the back of improvement in the world’s biggest economy.