Govt proposes steps to monetise gold, contain imports

Saturday, Feb 28, 2015,19:58 IST By metrovaartha A A A

New Delhi | To curb gold imports and monetise large idle stocks of the precious metal, Finance Minister Arun Jaitley today announced three schemes, including redeemable gold bonds which will carry a fixed rate of interest. The minister proposes to introduce a gold monetisation scheme, which will replace both the present gold deposit and gold metal loan Schemes.
The new scheme will allow the depositors of gold to earn interest in their metal accounts and the jewellers to obtain loans in their metal account. Banks/other dealers would also be able to monetize this gold, Jaitley said in his maiden full-year Budget speech.
India is one of the largest consumers of gold in the world and imports as much as 800-1000 tonnes of gold each year. Though stocks of gold in India are estimated to be over 20,000 tonnes, mostly this gold is neither traded, nor monetised, the Finance Minister said. He also proposed to develop an alternate financial asset, a Sovereign Gold Bond, as an alternative to purchasing metal gold. The bonds will carry a fixed rate of interest and also be redeemable in cash in terms of the face value of the gold, at the time of redemption by the holder of the bond, he said.
The move would also help in containing trade deficit and current account deficit (CAD), the net difference between outflows and inflows of foreign currencies. It had peaked to 6.7 per cent of GDP in the third quarter of 2012-13. He added that the government would commence work on developing an Indian Gold Coin, which will carry the Ashok Chakra on its face.
The coin would help reduce the demand for coins minted outside India and also help to recycle the gold available in the country, he added. As per the Economic Survey, the CAD is expected to fall below 1 per cent in the next fiscal on the back of easing of global commodity prices including petroleum products. Gold imports in January has declined to 38 tonnes from 142 tonnes in April 2014. In 2012-13, the country had imported 845 tonnes. Reduction in gold imports has brought down the trade deficit to USD 118.37 billion during April-January this fiscal.
India Bullion and Jewellers Association (IBJA) said that the industry has high expectations from the budget but nothing has been considered with regard to duties. The government has neither imposed any restrictions nor hiked the import duty on the gold. The industry was awaiting some announcement on the R&D front, it said in a statement.
Welcoming introduction of a Gold Monetisation Scheme, it said the scheme will help jewellers to obtain loans in their metals accounts and bank and other dealers would also be able to monetise the gold. Further, it said that the proposal to commence work to develop Indian gold coin would help reduce demand for coins minted outside India and also help to recycle the gold available in the country.