Concerned over rising gold imports, a Reserve Bank of India (RBI)-appointed working group on Wednesday said there is need to moderate demand for gold imports. The group also suggested higher customs duties on import of the precious metal and tax sops for pledging gold with banks.
“There is a need to moderate the impact on the current account deficit. Fiscal measures to reduce the gold imports may be revisited,” said a draft report of the working group on gold, which was assigned with the task of studying whether large gold imports are a threat to external stability.
The working group also suggested that banks need to design innovative financial instruments that can provide real returns to investors, which holds the key to reducing the excessive demand for gold.
There is need to convert both rural and urban demand for gold into investment in gold-backed financial instruments through dematerialisation of gold, the report added.