Wednesday, October 08, 2014

Time for Govt to Relook at Gold Import Curbs
Photo: Jewel Origins
04th October 2014: Investment demand for gold in India has dropped by 67 per cent from a year earlier to 49.6 tonnes during the second quarter of 2014, according to the World Gold Council. At the same time there is a slide in global crude oil and gold prices, providing a reprieve on the current account deficit (CAD). This presents the government with an opportunity to ease the numerous gold import restrictions. 

It should seriously consider relaxing the 80:20 rule introduced last year to reduce gold imports, leading to an unwanted fallout—a spurt in gold smuggling. While raising the gold import duty in 2013 from four to 10 per cent the government had mandated that 20 per cent of the imported gold be exported. 

Allowing unhindered access to gold can help revive the `5 lakh crore gems and jewellery trade that employs 25 lakh workers. The resulting customs duty collections will provide a much-needed boost to central tax revenues.

With savers getting increasingly disenchanted with gold, this is also the ideal time for the government to double up its efforts to bring the idle gold, estimated at 25,000 tonnes, lying with Indian households, back into circulation through gold deposit schemes. A proactive approach to motivating those keeping huge hoards of gold in lockers can make a major impact at this stage if the schemes are attractive and well-directed. This is a time for imaginative schemes and for innovative solutions.

In the decade through 2013, when a series of economic crises rocked the global economy, gold miners seldom thought its prices would decline, as people typically tend to buy gold in times of uncertainty. But now, after gold fell sharply and equity markets rose of late, this view may be under intense scrutiny. An outperformance of assets like stocks and bonds over gold, globally, and prospects of a stronger dollar amid the US economic recovery have hit investment demand. Given the decline in prices hedging by producers could increase in coming days.

Courtesy: The New Indian Express
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