"You are requested to kindly look into the matter (demands of the gems and jewellery industry) for appropriate action," said a letter written by the office of Gandhi to the Ministry of Commerce and Industry.

The All India Gems and Jewellery Trade Federation had written to Gandhi, demanding reduction in import duty on gold to two percent from 10 percent to encourage exports and curb smuggling.

The federation also demanded relaxation of the Reserve Bank of India (RBI) rule disallowing inward shipments of gold unless 20 percent of the previous imports is exported.     

The rule has reduced imports and ‘broken the backbone’ of the industry with short and erratic supply of gold, the federation's letter said.

"Smuggled gold has now become available freely, which is corrupting the industry. There is a major crisis and chaos in the industry today. Current policies and regulations are not at all conducive to ethical practices...which is plaguing the entire industry," it added.

Removal of restrictions on gold imports, the industry said, would provide relief to trade and industry, besides protecting the interests of millions of skilled artisans.

The government and the RBI had imposed restrictions on gold imports to contain the current account deficit, which soared to an all-time high of USD 88.2 billion or 4.8 percent of GDP in 2012-13.

Meanwhile, Commerce and Industry Minister Anand Sharma, who is in Davos, said the mechanism to link gold imports with exports has been working well.

"I've not seen that communication (from Gandhi's office) as yet as I am here at Davos. I can't comment on something that I have not seen but what I know is that this 80:20 formula has been working well," he said on the sidelines of the World Economic Forum.

He, however, said the government was open to discussing all issues with the gems and jewellery federation.


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