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Gold May 26, 2015 06:30:43 AM

ASSOCHAM: Proposed Gold scheme could stabilize India’s trade balance

Paul Ploumis
ScrapMonster Author
The Associated Chamber of Commerce (ASSOCHAM) stated that the gold monetization scheme announced by the government is likely to provide

ASSOCHAM: Proposed Gold scheme could stabilize India’s trade balance

MUMBAI (Scrap Monster): The Associated Chamber of Commerce (ASSOCHAM) stated that the gold monetization scheme announced by the government is likely to provide more stability to the country’s trade balance situation. The success of the scheme will reduce gold imports into the country, which in turn will narrow down the Current Account Deficit (CAD).

The gold monetization scheme proposed by the government is likely to bring gold prices on par with international gold prices. Normally, gold in India sells at a premium to London Metal Exchange gold prices. The launch of the scheme may result in marginal dip in domestic gold prices. Consequently, this could trigger increased purchases of the yellow metal. Overall, the market has expressed a positive view on the scheme.

Meantime, World Gold Council (WGC) stated that the gold monetization scheme show new bold thinking by the government. It also applauded the government for including Gems and Jewellery sector as part of the ‘Make in India’ programme. This could lead to revival of the industry and could generate jobs to millions. The ultimate aim of including the sector under this initiative is to make India the “Jeweler to the World”, WGC noted.

The gold imports by the country had touched peaks of $56.5 billion and $53.8 billion in FY12 and FY 13 respectively. Increased gold imports had led to CAD of 4.2% and 4.8% of GDP respectively. Later, strict gold import norms implemented by the government had helped to bring down gold imports significantly.

The proposed monetization scheme intends to mobilize idled household gold which could replace imported gold. Even if the scheme is able to attract 200 tonnes of deposits every year, it could help reduce India’s gold import bill by over $9 billion in a year, which in turn could bring in more stability to country’s trade balance.

 

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