"It is the stated policy of the government to reduce non-essential imports, because we should not be using our foreign exchange for non-essential imports; and gold is definitely one category where importing little less also will be fine, so far as the country is concerned," he said.
"So it (the decision) goes along with that policy. Whether it will encourage smuggling and other things, that is an independent problem which our enforcement agencies will deal with," he added.
Pandey said that just because some problem may arise, and "we do not curb these non-essential imports; that also is not a very sound economic policy".
He said that if one goes by the argument that increase in customs duty on gold to 12.5 per cent would result in smuggling, then the earlier 10 per cent duty or any tax on the yellow metal was also not justified.
"...the question is how far those arguments are valid," he added.
The gems and jewellery industry has expressed disappointment with the Union Budget 2019-20, saying the increase in customs duty will negatively impact the sector, encourage grey market and make jewellery more expensive in the domestic market.
All India Gem And Jewellery Domestic Council chairman N Anantha Padmanaban has stated that the increase in customs duty and goods and services tax (GST) will hike the prices by 15.5 per cent, which will benefit the grey market.
India is one of the largest gold importers in the world and the imports mainly take care of demand from the jewellery sector.
Gems and jewellery exports declined 5.32 per cent to $30.96 billion in 2018-19.
The country's gold imports dipped about 3 per cent in value terms to USD 32.8 billion during 2018-19. Dip in the imports are expected to keep a lid on the current account deficit.
Total imports of the precious metal in 2017-18 stood at $33.7 billion as against $27.5 billion in 2016 -17 and $31.8 billion in 2015-16.
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