The government is likely to chalk out a comprehensive national gold policy to bring the yellow metal into proper use, while also addressing the important issues on its import and consumption that are driving up the current account deficit (CAD) that yawned to 4.8% of the GDP in the last fiscal year, leading to a free fall in the rupee.
India is the world’s largest importer of gold, and imported about 830 tonnes of gold in 2012-13. According to some estimates, the country could be sitting on as much as 31,000 tonnes of the yellow metal. If that is used somehow, the rupee could be strengthened.
The government has raised import duty on gold to 10% from 2% a couple of years ago, and also slapped some other controls on gold, but officials are looking for long-lasting measures to curb imports and make use of the domestic stock.
One option being examined in the government is a gold deposit scheme, government sources said, adding that the issue of hoarding of the precious metal has also got to be addressed.
“We do need to look into the issue as the imports of gold is a cause for concern and is also adding pressure to the CAD,” a senior official said.
Soumya Kanti Ghosh, chief economic adviser, State Bank of India said a national gold policy must be immediately looked into. “Indians have a history of having a craze for gold and considering this, the government needs to have a clear policy rather than just increasing import duties to address the issue,” he said.
The government has been increasing import duties on the yellow metal, but with little effect on demand so far. Planning Commission deputy chairman Montek Singh Ahluwalia has said that he expects the measures taken so far to take effect in the third quarter, and gold demand to subside.
Industry chamber Assocham has called for a gold bank. “We have been suggesting to the finance ministry that we need a gold bank to address the issue,” said Rana Kapoor, president, Assocham and chief of Yes Bank.
Prime minister Manmohan Singh also said last week that imports of gold most be curbed to check the current account deficit (the difference between inflows and outflows of dollars).