* PM's advisere opposes ban on gold imports
* Govt sees improved economic conditions curbing gold
* Moderating inflation to affect gold imports
(Adds quote, details)
By Manoj Kumar
NEW DELHI, Feb 22 Easing inflation and a
revival in stock markets could dent gold imports by India, the
world's biggest consumer, pushing shipments down by about 35
percent in value terms in 2012/13, a government panel said on
Indians found gold a better investment than stocks and an
effective tool to hedge against inflation in the current fiscal
year when imports are estimated to reach $58 billion.
The government hopes gold imports will be $38 billion in
the full 2012/13 fiscal year.
"The stabilisation of basic macroeconomic conditions at home
is expected to curtail the demand for imported gold to be held
as an asset by Indian households," C. Rangarajan, chairman of
Prime Minister Manmohan Singh's economic advisory council said,
presenting the panel's report on the Indian economy.
India imported 969 tonnes of gold in 2011, almost the same
amount as in the previous year, as volatile prices dented
demand. Shipments will remain flat this year, the World Gold
Gold priced in Indian rupees gained about 37 percent
in 2011. In comparison, the stock market in Asia's third-largest
economy tumbled almost a quarter during the same period.
Analysts say heavy gold imports have contributed the most to
the spike in India's current account deficit, which is likely to
be 3.6 percent of gross domestic product in 2011/12, compared
with 2.7 percent in 2010/11.
Higher gold imports meant the country spent more U.S.
dollars, increasing the total import bill and widening the
current account deficit.
Gold imports alone contributed nearly 40 basis points in the
130 basis points widening of India's current account deficit
between fiscal year 2008 and fiscal year 2011, research house
Macquarie said in late November.
A demand for dollars also weakened the Indian rupee by
nearly 16 percent in 2011. The restricted currency has since
rebounded. India's headline inflation has eased to 6.55 percent
in January, the lowest level in more than two years.
"The import of gold is because of high rate of inflation and
unattractiveness of returns on the financial assets. We should
act on that," Rangarajan said.
The government should aim at bringing down the current
account deficit to 2 to 2.5 percent of GDP, Rangarajan said.
The government has already moved to discourage gold imports.
It increased import duty on gold to 2 percent of value from
the earlier flat 300 rupees per 10 grams, and that of silver to
6 percent of value from the earlier 1,500 rupees per kg.
The government appears less interested in the slightly
higher revenue the move would generate than in lower imports.
But Rangarajan ruled out any restrictions on imports, given
the country's traditional love for the yellow metal. A ban would
also encourage smuggling, he said.
As a way of limiting the appetite for gold, the country
should improve domestic growth and investment conditions which
will make other financial instruments attractive, he said.
"Going ahead I believe the inflation rate will come down,
and if the rate of returns on financial asssets becomes
attractive then we might be able to reduce the import of gold,"
(Writing by Siddesh Mayenkar; Editing by Krittivas Mukherjee
and Anthony Barker)