NEW DELHI (Commodity Online): Industry body, ASSOCHAM has asked the India government to discourage gold imports and encourage channelising savings in formal financial instruments to increase productive capacity of the economy.
India, the largest importer of gold in the world, accounts for nearly one-third of the annual demand with import bill rising from 4.1 billion dollars in 2001-02 to 33.8 billion dollars in 2010-11, according to study titled ‘India’s Gold Rush – Its Impact and Sustainability.’ by The Associated Chamber of Industry and Commerce of India (ASSOCHAM).
On the basis of compound annual growth rate of period 2010-11 over 1999-2000, the gold import bill could total 100 billion dollars by 2015-16.
According to ASSOCHAM study, gold as a commodity does not add much to the productive capacity of an economy.
Moreover, foreign exchange reserves used to import gold can be used to get other commodities.
"The current account deficit is a cause of concern because of inelastic gold and oil demand" said thae apex bank, Reserve Bank of India (RBI).
India’s gold demand is ironically 37.6% more than China’s although China’s GDP is 3.5 times of India’s GDP and when Compared with the United States, which has a 14 trillion dollar economy, ten times the size of Indian economy, India’s gold demand is almost five times.
With the government increasing import and excise duties on gold and silver, both commodities are set to cost more. The new rates on ad valorem basis – 2% on 10 grams of gold and 6% on one kg of silver – mean that importers will have to pay double the duty.
"Efforts must be made to introduce more financial saving instruments and extensive education campaigns should be undertaken – particularly in rural areas – to minimise propensity towards gold" said DS Rawat, general secretary, ASSOCHAM.
