FM wants curbs on gold import to continue

However, some experts, including RBI Governor Raghuram Rajan, have favoured doing away with curbs on gold imports because they lead to smuggling.

Notwithstanding the likelihood of the current account deficit (CAD) narrowing to less than $50 billion, Finance Minister P Chidambaram on Monday made a case for continuing some kind of restriction on gold imports.

"I think there should be some restraint on gold imports. We should also attempt to discover more gold in our own country," he said in an interview to CNBC-TV18.

Referring to a recent Supreme Court judgement on auction of all closed mines, he said the mines ministry should sell "the so-called closed mines because there are persons around the world who have met me and said, 'Give us the mines and we would be able to extract gold.'"

He said, "As a proposition, restraining gold imports is a correct move."

However, some experts, including RBI Governor Raghuram Rajan, have favoured doing away with curbs on gold imports because they lead to smuggling.

Both the government and the RBI had imposed several restrictions on gold imports to check the widening CAD, which according to Chidambaram, "will be lower than $50 billion" this financial year.

The CAD touched an all-time high of $88.2 billion, or 4.8 per cent of GDP, in 2012-13 because of various factors, including rising gold imports.

The minister also reiterated the government's commitment to restrict the fiscal deficit to 4.8 per cent of GDP in the year ending March 2014.

Answering questions on inflation and how the RBI would respond at its next monetary policy review on January 28, Chidambaram said, "The data stares in your face. The data shows that inflation is driven by rise in prices of fruits, vegetables, eggs, meat, fish and milk. Therefore we have to address these issues."

"...by recognizing that there are several factors driving inflation, we are now attacking the main factor, which is primary articles and of primary articles, it is fruit, vegetables, eggs, milk."

The minister, however, refrained from commenting on what the RBI Governor would do check the rising prices.

On the possibility of tweaking tax rates while presenting the vote on account in Parliament, Chidambaram said, "Whether there will be tax changes is too early to say."

Chidambaram also said the gradual reduction of diesel subsidy by increasing prices of the fuel by 50 paise a litre every month was the right decision.

"If we had started this three years ago, by now, we would have wiped out the gap. Yes, the rupee depreciation accentuated the problem a bit, but that is something we have to live with," he said.