Gold prices will fall further

Mr Kher said the trade ministry was in favour of "rationalising" the import duty and that there was a clear view that "normalcy" needed to be restored to gold imports.

Following a steep rise in the country's current account deficit, India had raised the gold import tax last year to 10 per cent. India is the world's second-biggest gold buyer and the government is under pressure from the industry to loosen restrictions.

India's exports have risen in recent months due to a pick-up in demand from Europe and the United States and a weaker rupee currency, while strict controls on gold imports have helped prevent a brewing balance of payments crisis last year.

"Export figures have begun to acquire their normal levels, which is encouraging," Mr Kher told reporters.

Exports in May jumped 12.4 per cent from a year earlier to $28 billion, while imports were down 11.41 per cent to $11.23 billion helped by a 72 per cent drop in overseas gold purchases.

Spot gold prices were hovering around Rs. 27,230 per 10 gram today. "There is a feeling in the market that import duty will be reduced from 10 per cent to 4 per cent in the upcoming budget. If that happens and rupee continues to remain strong, gold prices can come down to Rs. 24,000-25,000 per 10 gm," Sachin Kothari, director of BullionIndia, had said earlier.