UPDATE 1-India officials ready plan to ease gold import curbs-sources

Wed May 21, 2014 7:46am EDT
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By Suvashree Dey Choudhury and Manoj Kumar

MUMBAI/NEW DELHI May 21 (Reuters) - The Reserve Bank of India and finance ministry officials will recommend that the new government relax strict gold import rules to head off a surge in illegal buying, officials with direct knowledge of the plan said.

Last year, India imposed restrictions on gold imports, the second biggest import after oil, following a steep rise in the country's current account deficit.

However, the curbs spurred smuggling into India, the world's biggest buyer, through illegal "hawala" channels, which are informal international networks for remitting money.

"We don't want to suppress demand artificially as it is creating hawala money. The longer you wait, the more will be such parallel channels," one of the officials said.

India's incoming prime minister, Narendra Modi, who led the opposition Bharatiya Janata Party (BJP) to a decisive victory in a just-concluded election, has indicated his willingness to remove the gold curbs.

Modi will be sworn in on Monday and the plan to ease the curbs is ready for his government to take up.

"The next finance minister can sign the file on gold imports whenever he wants to sign it," one of the officials said.   Continued...