NEW DELHI (TIP): Finance Minister P. Chidambaram appealed to people not to buy so much gold as a way of reducing hefty imports, speaking on television a day after his 2013/14 budget surprised traders by keeping gold import duty unchanged at 6 percent. But Chidambaram, who is trying to rein in imports by the world’s biggest bullion buyer to curb a record current account deficit, told CNBC television on Friday the duty was not yet high enough to increase smuggling.

“I’m hoping that the people of India will heed my appeal and will not demand so much gold,” Chidambaram said. Traders had expected a rise in duty to 8 percent in the budget after a 50 percent hike on January 21 from 4 percent was neutralised by falling global prices. Chidambaram said on Friday the higher import duty had “brought down gold imports to some extent.” But, traders said buying actually picked up after a more than 2 percent drop in prices triggered by a strong dollar.

“After the import duty, prices went down by 3,000 rupees and that spurred buying,” said Kumar Jain, vice-president of the 12,000-member Mumbai Jewellers Association. Indians, for centuries obsessed with gold as a mark of wealth and investment, imported 860 tonnes of gold in 2012, down just 11 percent on a year earlier despite record high prices in the second half. Raising duty too much risks encouraging illegal imports of gold but Chidambaram said he did not think taxes were high enough for that yet.

“There is a point at which more duties will only tempt people to indulge in more smuggling. I don’t think we have reached that point yet,” he added. Gold is second only to essential crude oil in the import bill of Asia’s third-largest economy, with coal and edible oils also costly items. Chidambaram said ways to tackle the current account deficit, which hit 5.4 percent of gross domestic product (GDP) in the July to September quarter, were by encouraging domestic production and boosting exports.