Rajan hints at gradual easing of gold import curbs

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After successfully weathering the high CAD scare in the just-concluded fiscal, RBI Governor Raghuram Rajan on Wednesday favoured easing of curbs on gold imports but stressed on the need to do it in a slow and steady manner.
“I think what we have to do is slowly and steadily take actions to remove some of these curbs (on gold imports),” Rajan told analysts at the post-policy call with researchers and analysts today.
He, however, said the timing on relaxation on gold imports needs to be discussed with the government. “It would be useful for some of the big uncertainties facing us to be behind us rather than still in front of us before major actions are taken up in this regard, but I don’t rule it out,” he said. Earlier this week, finance minister P Chidambaram had indicated that the government might further ease restrictions on gold imports after the monetary policy.
“Some relaxations were made a few days ago when more banks were allowed to import gold. We could consider some more relaxations in consultation with RBI,” he had said. The government had raised customs duty to 10 per cent on gold from 2 per cent earlier. It can be noted that gold imports has been the second biggest import bill after crude, leading to higher CAD, which had touched 4.8 per cent of GDP in FY13. However, with the curbs on gold imports, CAD had been brought to about $35 billion in FY14, according to Chidambaram.
On interest rates Rajan said that if the disinflationary process continues at a faster-than-anticipated pace, the RBI can go in for a cut in interest rates. “If disinflation happens in much faster rate than anticipated and we believe we can finish this period with the appropriate amount of final disinflation, we certainly will be in position to cut the interest rate at that time,” he said.
The Governor noted “we are in early days in the disinflationary process, we have to see how it works out, but we are hopeful that it would play out well.”
‘Re hitting 45-50 may impinge on India’s exports’
Mumbai: While the current slowdown in exports has nothing do with appreciation of rupee, strengthening of the domestic currency to 45 or 50 levels against the US dollar might “impinge” on the country’s outward shipments, RBI Governor Raghuram Rajan said. “We are not overly worried about that… Nevertheless a substantial strengthening of the currency to $45 and $50 levels might impinge on exports especially because some of our competitor markets have depreciated currencies,” he told CNBC TV18. PTI

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