Shift in India's Gold Policy


The domestic household stock of gold in India estimated at over 25,000 tons, the country’s annual purchase of over 30 per cent of global gold purchase leading to an estimated cumulative demand of 1200 tons by 2020 and low share of gold in country’s forex reserves as compared to other countries and not always economic and prudent handling of this precious metal, all these and more point to the urgency in having a national policy for gold management. The economic and technical policy aspects highlighted in the article should get the attention they deserve from GOI. The policy should look at a strategy that will encourage transparency in transactions, elimination of wastages, standardization of valuation norms and facilities for gradually converting even the existing stock of gold with individuals and institutions to conform to internationally acceptable standards. 

RBI and Centre, in the early 1990’s actively considered setting up a Gold Bank with a mandate to do real gold-related banking, also taking care of the forex dimensions of the idea. However, the project was a non-starter presumably for profit-related reasons and possibly, external pressure. Perhaps the time is opportune to reopen the debate on professional management of India’s gold resources. Authorities should think in terms of dedicated professional institutions at regional/state level which will handle gold from a banking angle equipped with linkages for import and export of gold and gold products with borrowing and lending capabilities. The initiative has potential to take India out of the balance of payment and CAD problems the country is facing now.

M G Warrier


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