India should retain curbs on gold imports at least until March to stabilize the current-account deficit that weakened the rupee to a record low last year, Economic Affairs Secretary Arvind Mayaram said.

The government needs to keep the deficit low and should not tamper with the restrictions on gold shipments until at least the end of the fiscal year on March 31, Mayaram told the Press Trust of India. D.S. Malik, a finance ministry spokesman in New Delhi, confirmed the comments to Bloomberg News.

India’s gold purchases slumped after the government increased the tax on imports three times in 2013 to 10 percent, linked shipments to re-exports and tightened financing rules to curtail a record current-account deficit that pushed the rupee to an all-time low against the U.S. dollar. The gap will narrow to about $56 billion this fiscal year from $88 billion in 2012-2013, the Reserve bank of India estimates.

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“Gold imports have been identified by policy makers as a problem area because this is not some kind of productive imports,” said Siddhartha Sanyal, an economist at Barclays Plc in Mumbai. “Just because the numbers are favorable for the last few months, I don’t think they will change it dramatically. They are not in any big hurry to change it.”

The deficit was $5.2 billion in July through September, compared with $21.8 billion for the prior quarter and the lowest level since 2010, the central bank said Dec. 3. The current account is the broadest measure of trade, tracking goods, services and investment income.

Premature Withdrawal

The government may allow the deficit to stabilize for about six months before considering any relaxation in gold imports, Samiran Chakraborty, head of regional research at Standard Chartered Plc, said by phone from Mumbai.

It would be premature to withdraw gold import restrictions now, RBI Governor Raghuram Rajan said Dec. 19. “Once we feel more comfortable with the current-account deficit, once we have a sense that tapering, at least the threat of it is behind us, we will certainly consider unwinding some of these distortionary actions,” he said in a conference call with analysts.

The government is seeking to cut gold imports to 800 metric tons this financial year from 845 tons a year earlier. Imports totaled 423 tons in the six months through September, according to the World Gold Council. The regulations spurred a rise in smuggling and pushed premiums that jewelers pay to importers to a record $160 an ounce over London price last month.

“Although one would never encourage smuggling to happen, the cost of this compared to the cost to the exchequer, or to the country from a higher current-account deficit, if you evaluate the two, probably one would say the cost of higher current-account deficit is larger,” said Chakraborty.

Consumption in India, which imports almost all the bullion it needs, accounted for about 20 percent of global demand in 2012, according to data from WGC.

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