India is likely to cut its import tax on gold before the end of February to 2% from the current level of 10%, a top official told The Wall Street Journal.

India's government had gradually raised the import tax on gold to 10% from 2% since early 2012 to bring down the country's current-account deficit. It tightened restrictions further last year by asking importers to re-export at least 20% of the gold they bring into the country.

The government is now considering reducing the import tax as the current-account deficit declined to $45 billion from $88 billion the year before.

Gold import duty cut will help to increase government’s revenue and suppress the rising incidents of gold smuggling across the country. Such an action would minimize the procurement costs for gems and jewelry exporters and will in turn provide big boost to jewelry exports from the country. 

This would also add significant support to global gold prices.

The Finance Ministry will announce its decision in the federal budget to be presented in Parliament on Feb. 28.