Calling imports of gold and consumer goods unproductive, the Economic Survey 2011-12, released on Thursday, pointed out the need to discourage imports of the yellow metal. It said: “There is scope to discourage unproductive imports, like gold and consumer goods, to restore balance.”
According to a report of the Prime Minister’s Economic Council (PMEAC), the country’s total gold imports during 2011-12 is likely to touch $58 billion. This would form a sizeable part of the rising current account deficit, which was at $32.8 billion in the first half of 2011-12.
However, imports of gold have already started falling. According to data from the World Gold Council, the country’s import of the commodity fell from 298 tonnes in the January-March 2011 quarter to 157 tonnes in the October-December 2011 quarter.
PMEAC projected gold imports to slide to around $38 billion in 2012-13. The fall in import is likely to continue as gold prices have remained very high, at around Rs 28,000 per 10 grams.
Gold prices are determined by cost of imports, and gold and US dollar movements are generally inversely related. So, whenever global gold prices fall, the dollar rises. And, since the Indian currency has also depreciated in the recent times, Indian consumers have not been able to benefit from the sliding global gold prices.
However, the Survey has not specified measures to discourage imports of gold and consumer goods. It said: “Some weakening of the rupee is a positive development as it results in lowering imports.”
Bhargav Vaidya, a bullion analyst said: “Some alternative instruments — which can be liberal gold deposit schemes — should be allowed.”
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Gold deposit schemes can mobilise idle gold with public and banks can lend gold so collected to traders and jewellers. This can work as an alternative to imports.
PMEAC had suggested, “the stabilisation of basic macroeconomic conditions at home is expected to somewhat curtail the demand for imported gold held as an asset by Indian households.”