Gold and silver imports declined 68.8 per cent to $1.77 billion in December after the government imposed restrictions on inbound shipments of the yellow metal aimed at narrowing the current account deficit.
Imports of gold and silver in December 2012 stood at $ 5.6 billion.
However, the level in December was higher than $1.05 billion in November.
Gold and silver imports during April-December declined 30.3 per cent to $27.3 billion from $39.2 billion a year earlier.
Lower gold and silver imports helped to narrow the trade deficit to $10.1 billion in December from $17.5 billion.
"There has been a substantial decline in trade deficit.
“It is down by about 42 per cent," Commerce Secretary S R Rao told reporters in New Delhi.
The trade deficit stood at $110 billion during the first nine months of this financial year compared with $ 146.8
billion a year earlier.
India's current account deficit, which is the excess of foreign exchange outflows over inflows, touched a historic high of 4.8 per cent of GDP in 2012-13, mainly due to rising imports of gold and petroleum products.
A high CAD puts pressure on the rupee, which has depreciated by about 15 per cent since April 30.
According to the Reserve Bank of India, the CAD in this financial year is likely to be in the range of $56 billion as against the lifetime high of $88.2 billion in the previous year.
The government had increased customs duty on gold to 10 per cent and banned import of gold coins and medallions, while the RBI linked imports of the metal to exports.
The government is inclined to keep curbs on gold imports until the end of March to contain the CAD, Economic Affairs Secretary Arvind Mayaram said in an interview.
India is the largest importer of gold, which is mainly utilised to meet the demand of the jewellery industry. Imports stood at about 830 tonnes in 2012-13.