Subdued trend in the international bullion markets, coupled with anticipated heavy demand back home during the festive season has led to an exceptional five-fold jump in Gold imports during the month of September 2014.

According to official data, India imported $ 3.75 billion of Gold in September 2014 – this is 5.5 times more than $ 682.50 million worth of Gold imported in the same month a year ago.

Higher imports have pushed the trade deficit to a 18-month high at $ 14.20 billion, which does not sound well for the Indian economy.

It may be recalled that the UPA-Government and the RBI (Reserve Bank of India) had imposed a string of restrictions on Gold imports in order to bring down the CAD (Current Account Deficit) under control.

Way back in FY13, the CAD had widened to a record 4.8 per cent of the GDP (Gross Domestic Production). Hence, the government then hiked the custom (import) duty on Gold to 10 per cent and also banned imports of Gold coins.

The RBI too linked import of the yellow metal to exports, in order to keep a check on the inflows.

However, after getting a breather on the trade deficit front, the Central Bank in May 2014 eased the import ban, by allowing seven more private agencies to import the precious metal. Also the 80:20 rule was relaxed.

Following which, Gold Price in India have been hovering in the range of Rs 26,000-29,000 for the last five months.

The recent sharp spike in Gold imports has led to alarm bells in Modi-led BJP government. According to media reports, the finance minister Arun Jaitley has reportedly indicated that the government may take some action on restriction of Gold imports only after the festive season is over, since Diwali is just couple of days away.

Reports also indicated that the government has written to the Central Bank to take some measures on their behalf.

Either way, it seems like Gold prices will be headed higher once some restrictions are imposed either by the government or the RBI.

For now, enjoy the festive season and Happy Diwali to all the readers.