Earlier this month, finance minister P. Chidambaram had
warned that India’s appetite for imported gold was not sustainable; it
had the potential to turn a threat to the country’s balance of payments
(BoP) into a full-blown crisis. In short, the stern message was that
Indians had to consume less gold.
The logic was simple: the share of gold in the country’s
imports has risen from 6.9% in 2008-09 to 11.5% in 2011-12; in value
terms, this insatiable appetite for gold cost the country $29.9 billion
in 2008-09 and $56.5 billion in 2011-12—an increase of nearly 200%.
A few weeks later, the finance minister has delivered on
the implicit threat: he has raised the import duty on gold to 6% from
4%. But the concern is that the demand will now be routed through
illegal channels—smuggling. So what was a BoP problem may end up giving a
fresh thrust to black money.
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