Budget Policy Changes Could Bode Well for India’s Gold Industry

SEATTLE (Scrap Monster): The Market Update Report published by the World Gold Council (WGC) endorses the gold-focused policies announced by the Indian government in the Union Budget presented on February 1, 2018. The country’s Finance Minister had highlighted the government’s intention to formulate a complex gold policy, set up gold exchanges in the country and revamp the existing Gold Monetization Scheme.

The Union Budget 2018 made three announcements that are likely to boost the country’s fold industry. Firstly, it intends to formulate a comprehensive gold policy, which in turn will help in the overall development of gold as an asset class. Secondly, the proposal to set up regulated gold exchanges in the country may result in more efficient and transparent gold market, unlike the current market which looks highly fragmented. Finally, the ambitious plans to revamp the gold monetization scheme may make it more convenient and easier for users to open Gold Deposit Scheme (GDS) accounts.

The impetus on various schemes intended to boost rural economy may bode well for the gold market. It must be noted that rural areas account for around two-thirds of India’s total gold demand. As per rough estimates, 1% increase in rural income could result in 1% jump in gold demand. The various schemes intended to double farmer’s income by 2022 could boost rural gold demand significantly, WGC noted. Incidentally, India is expected to become one of the fastest growing economies of the world in coming years.

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Overall, the world gold trade body believes that the new policy announcements are positive for India’s gold market. However, WGC believes that the government has failed to provide details about its intentions and the exact steps of action it intends to take in order to achieve its objectives. It hoped that government officials, including the think-tank NITI Aayog will come out with a clearer course of action over the coming months.