Attributing the surge in gold imports to high current account deficit, the government on Monday said it was considering schemes such as gold deposits, accumulation plans, gold-linked accounts and pension products to curb demand for the precious metal.
In its mid-year economic analysis tabled in Parliament on Monday, the government said gold-backed products would help investors enjoy benefits of investment in the metal without investing in the physical commodity.
“Now gold backed financial instruments in the form of modified gold deposits and gold accumulation plans, besides gold-linked accounts and pension products linked with the precious metal are some measures being considered to reduce the attraction of a direct investment in bullion and jewellery in the domestic market and check a substantial rise in imports,” the review said.
However, gold-linked investments would have to be monitored to see whether the overall demand for the metal actually falls, it added.
Worrying imports
The Finance Ministry’s Chief Economic Advisor Raghuram Rajan told reporters: “We are worried about gold imports. It is an unproductive instrument. The way to curb holding of gold is to create more attractive financial instruments.
“Some gold linked instruments have been talked about by the RBI but potentially there could be other financial instruments to attract investment.”
The current account deficit (CAD) has been rising on the back of record trade deficits, which in October jumped to a 12-year high of $21 billion on the back of rising oil and gold imports.
“We are worried about CAD. We want to take steps to monitor it,” Dr. Rajan said on the government’s worry on high CAD.
The Reserve Bank of India has unveiled a slew of curbs on gold purchase and financing as imports touched a record high last year, pushing up the current account deficit to a historic high of 4.2 per cent in the year.
In 2011-12, India’s gold imports stood at $60 billion and the quantum of import was 1,067 tonnes.
A Finance Ministry official said the imports had shown signs of moderation and that gave the government hope that CAD would be lower this fiscal.
In the April-June quarter of the current fiscal, however, gold imports had contracted by 18.4 per cent year-on-year to Rs.71,912 crore ($13 billion).
Gold imports into the country had risen considerably in the last 3-4 years.
Published - December 17, 2012 03:25 pm IST
