NEW DELHI/MUMBAI: India's central bank is in talks with the government to increase curbs on gold imports, Deputy Governor S.S. Mundra said on Monday, reflecting policymakers concerns that a jump in inbound shipments will worsen the country's trade deficit.
Mundra's comments come on the same day that trade data showed India's gold imports in October surged nearly four-fold to $4.18 billion from a year ago. India is the world's No. 2 gold consumer behind China.
Officials from the Reserve Bank of India and the finance ministry met on Thursday to review the country's gold import policy but no decision was taken.
Struggling with high current account and trade deficits, India last year raised the import duty on gold to a record 10 percent and unveiled some restrictions. But it relaxed part of these curbs in May.
"With the surge in gold imports which has been witnessed, it warranted a relook," Reserve Bank of India Deputy Governor S.S. Mundra told reporters on Monday, referring to gold import curbs.
Although India's trade deficit has so far been kept in check by lower oil imports, analysts warn that is unlikely to last if inbound gold shipments continue to surge.
Analysts also warn the trade deficit could widen should exports slow because of a weaker global economy, a prospect made more plausible after data on Monday showed Japan unexpectedly slipping into recession in the third quarter.
India's exports fell 5 percent in October to $26.1 billion, according to the trade data.
"The October trade data was disappointing as weaker exports and surge in gold imports offset the effect of lower oil prices," said A Prasanna, economist at ICICI Securities Primary Dealership.
"Weakness in exports is a real concern now with euro-zone economy spluttering and global growth beginning to look unbalanced," he added.
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