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Gold is 1/4th of India's Trade Deficit

NRIs who were returning to India were allowed to bring in upto 10 kgs of Gold (on payment of customs duty) Now that limit has been cut to 1 kg, because domestic jewellery manufacturers said it was hurting their businesses. This includes jewellery, and supposedly the limit was being used by Indians to get jewellery from abroad, avoiding the high "making charges" that Gold has.

More importantly, the table provided by the Press Information Bureau (PIB) tells us something interesting. While total Gold Imports, till Feb 2012 for FY 11-12 were 986 tons, a very high amount, exports were up 200% from earlier, with a 138 ton print.


But, because the dollar has appreciated and the Gold price has gone up, we have an increasing import bill in rupees. Gold in dollars has largely been constant though.


Our Trade Deficit is about 8.8 trillion (880,000 cr.), about 2.18 trillion is the net import cost of Gold. That means Gold accounts for 25% of our trade deficit. Now if we cut inflation down tremendously, we might actually see a drop in demand – as a store of value, a rising price continues to attract demand.

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