Shift in India's Gold Policy
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M G Warrier
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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