Modi calls on Indians to mobilise idle gold, cut imports

Friday, 6 November 2015 00:00 -     - {{hitsCtrl.values.hits}}

Reuters: Prime Minister Narendra Modi on Thursday exhorted Indians to put thousands of tons of gold stacked away in households and temples into productive use, launching three programs aimed at cutting massive imports of the metal.

The government hopes the gold monetisation scheme will prompt families to deposit the metal in banks for interest while the sovereign gold bond program will cut physical demand, though some experts reckon public response will be limited.

India’s obsession with gold is rivalled only by China, with the metal used widely in wedding gifts to brides, religious donations and as an investment. The country has amassed about 20,000 tons of gold worth over $800 billion in family lockers and temples.

Modi called the schemes an “icing on the cake”.

“Gold has often been a source of women’s empowerment in Indian society, and these schemes will underscore that sense of empowerment,” he said.

Last year India spent about 1.7% of its GDP on gold imports that range between 800-1,000 tons annually.

The deposited gold will be auctioned off from time to time to meet domestic demand for jewellery and coins.

“These schemes will be  transformative for the Indian gold industry,” said Somasundaram PR, World Gold Council’s managing director in India. “However, the expectations from the schemes in the short term must be tempered as it will take time to build the infrastructure and products and for customer acceptance to grow.”

Industry experts said many prospective depositors will not take the scheme due to concerns that the tax department could question the source of gold, while others may find conventional bank deposit rates of about 8% more attractive.