CAD, which is the difference between outflow and inflow of foreign exchange, widened to 2.4 per cent of the GDP in the first quarter of 2018-19. Large trade deficit and depreciation in the rupee against the US dollar are putting pressure on the CAD.
India is the largest importer of gold, which mainly caters to the demand of the jewellery industry. In volume terms, the country imports 800-900 tonnes of gold annually.
To mitigate the negative impact of gold imports on trade deficit and CAD, the government took certain measures to cut the inbound shipments of the yellow metal.
Those measures include imposition of restriction on duty free gold imports from the South Korea as allowed under the existing India-Korea free-trade agreement, and imposition of self-use condition on Premiere Trading House/Star Trading House authorised to import the precious metal (gold) directly from overseas bullion supplier.
The government has also raised import duties on certain products such as some communication equipment to contain the CAD.
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