The government of India, trying to reduce the mark-ups for gold, reduce its cost to end consumers and suppress smuggling, decided to repeal the law, which obliged to sell 20% of the total imported yellow metal for export.
On November 20, 2014, the Reserve Bank of India circulated information on the abolition of the norm adopted on August 14, 2013 in order to reduce the balance of payments deficit and ease the pressure on the rupee, which fell significantly in value.
"The government of India has decided to cancel the scheme" 20:80 "as applied to gold and remove restrictions on its imports," the statement of the Reserve Bank of the country says. The rule "20:80", as well as a 10 percent customs tax, led to an increase in smuggling and distortion of data on imports. The government said that the balance of payments deficit is no longer taken into account when preparing the budget, so there is no need to reduce the import of gold. In fiscal year 2014, the balance of payments deficit was 1.7% of India's GDP, compared with 4.7% a year earlier. In 2015, it is likely to remain at the level of 2014.
The Indian government also suspected that the restrictions forced importers to accumulate gold reserves, which distorted trade figures. The decision to get rid of these restrictions was a surprise to all players in the precious metals market, as its representatives expected even more serious restrictions after a significant increase in the import of gold in October from an average of 25 tons to 114-115 tons per year.