Government Issues Clarification on Gold Imports Scheme (Download PDF)

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Government of India had clarified that abolition of 80: 20 scheme eliminated undue advantage to Premier Trading Houses (PTHs) / and Star Trading Houses (STHs) and import of gold was also reduced.

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Image of Bridging Trade Deficit Gap

Image of Bridging Trade Deficit Gap

80: 20 Import Scheme

  • The scheme was introduced in August 2013 to curb the import of gold. During this period, the country’s macroeconomic indicators, especially the current account deficit (the excess of imports over exports), were weak. It was introduced by UPA government

  • While 80 % of gold imports under the scheme (India is one of the biggest importers of gold globally) could be sold in the country, at least 20 % of imports had to be exported before importers could bring in new consignments.

  • The permission to import the next lot was to be given upon the fulfillment of the export obligation. The policy aimed to discourage gold imports to rein in the widening current account deficit.

  • Only state-owned banks and firms were permitted to import gold.

Modifications of 80: 20

  • The 80: 20 scheme was relaxed in May 2014 by the RBI at the behest of the Finance Ministry. Jewelers, bullion dealers, authorized dealer banks and trade bodies had approached the Ministry requesting a relaxation of the policy.

  • The curbs were eased after crude oil prices dropped to a four-year low. The easing of rules allowed more agencies to import gold.

  • In May 21, 2014 review, the central bank allowed star and premier export houses to import the yellow metal subject to some restrictions. Six to seven private sector trading firms were also permitted to import gold under the scheme.

  • These private firms accounted for 40 % of the total gold imports in April-September that year. The state owned banks and firms and their nominated agencies were allowed to provide gold loans for domestic use to jewelers and bullion traders.

  • These rules were apparently eased to facilitate gem and jewellery export, which had declined following the curb on gold import.

When was 80: 20 Scheme Scrapped?

  • On November 28, 2014, the scheme was scrapped by the NDA government.

  • Government examined the circumstances as to why private parties PTHs/STHs were benefitted by allowing to import gold under 20: 80 scheme.

  • CAG pointed out that the average monthly import of gold declined to 71.50 tons between December 2014 to March 2015 from a high of 92.16 tones during June 2014 to November 2014 when PTHs/STHs were allowed under 20: 80 scheme.

- Published/Last Modified on: June 25, 2018

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