WGC: India must harness gold to boost employment, economy

Author: Paul Ploumis21 Jan 2015 Last updated at 07:28:12 GMT

NEW DELHI (Scrap Monster): According to London-based World Gold Council (WGC), Indian authorities should stop viewing gold as a burden. Instead, they must think how effectively gold can be harnessed to boost the country’s employment opportunities and economic growth. This view was expressed by Alistair Hewitt, Head-Market Intelligence at the Council.

According to Hewitt, India has taken a series of positive measures in the past few months, the most important of all being the decision to scrap the controversial 80:20 rule which mandated that at least 20% of the imported gold be reserved for exports. Now, the country needs to formulate a long-term policy for gold supplies. The government should refrain themselves from restrictive actions against gold. Instead, the country could implement measures to mobilize huge stocks of domestic gold in the country. According to estimates, Indian households are said to contain nearly 22,000 tonnes of gold.

The Central Bank needs to come up with the right policies and necessary infrastructure to foster mobilization of gold stocks. The country needs to encourage commercial banks to introduce gold-backed products. In addition, the government authorities must put their acts together to set up necessary infrastructure such as gold exchange and accredited gold refineries. India could learn from Turkey in bringing the stocked gold into the financial system.

The Indian gold demand has dropped lower in 2014, when compared with the previous year. The drastic fall in gold prices had resulted in huge gold intake during 2013. The gold imports are likely to remain in the range between 850 tonnes and 950 tonnes in 2014, obviously lower when compared with the 2013 gold demand of 975 tonnes.

Hewitt predicts that gold demand in the country is likely to see continued growth in 2015. The hopes of strengthening Indian economy and the country’s strong cultural affinity with gold may continue to boost gold demand in the country.