India gold imports likely to drop sharply after implementation of gold scheme

 

NEW DELHI (Scrap Monster): The All India Gems and Jewellery Trade Federation (GJF) has highlighted on the necessity for tie-ups with banks and jewelers towards successful implementation of the government’s proposed gold schemes. According to the trade body, the gold bonds and monetization schemes must include jewelers as they serve as the direct link with customers. Moreover, tie-ups with banks need to be made before the proposed schemes are rolled out through the country’s jewelers.

 

Earlier, Indian Finance Minister had announced two schemes- one permitting gold deposits with banks that carry interest for customers and the other offering fixed interest to customers through redeemable gold sovereign bonds. The bond scheme is likely to gat fast acceptance by urban population in the country. But the success of the scheme will depend on rural customers who are believed to possess 65% of physical gold holdings. A major shift in gold sentiments is what is required. The customers must be educated to view gold as an asset for investment.

 

Both the schemes together are expected to attract approximately 100 tonnes of gold. This will reduce the country’s dependence on gold imports. According to WGC estimates, gold demand in the country declined by nearly 13.5% in 2014 to 842.7 tonnes, as against the demand of 974.8 tonnes in 2013. The successful implementation of the gold bonds and deposit schemes is expected to bring down India’s annual gold imports by at least 25% during the current year.

 

The government is yet to announce the general guidelines with respect to the gold schemes proposed during the Union Budget. The schemes aim to liquidate the available gold stocks with Indian household and bring more money into the investment stream. The money under both the schemes will be routed through banks. As a result, the Reserve Bank of India (RBI) will have control over the entire process.