Chairman, Parliamentary Standing Committee on Finance, Dr M. Veerappa Moily said today India Surgical Strikes on Pakistan have not affected gold prices in India at an ASSOCHAM event held in New Delhi today.
"Need policies for promoting gold as investment of the country; shall suggest appropriate policies to standing committee. The domestic saving coming down drastically and the gold can play an important role in the economy of the country," said Dr Moily while inaugurating an ASSOCHAM ninth International Gold Summit and Excellence Awards.
Due to its high liquidity, financing against gold has caught on very well with banks. With huge base of stable and growing depositors coupled with larger number of loan seekers, banks have become a vibrant hub for gold activities-both for purchase as well as lending.
The importance of Banks in this activity cannot be undermined and as the demand for gold grows, it will increase the importance and effectiveness of banking sector -largely for its trust as well as affordable lending rates.
He said that gold has been considered as a safe haven asset throughout history as it has been viewed as a store of value and a means of exchange for millennia. It is essentially a currency that cannot be manipulated by the interest rate policies of the government and has traditionally been used as a hedge against inflation or a falling dollar.
The sentiment towards the yellow metal remains very high irrespective of the rise/fall in prices and this love for the commodity has made the nation heavily reliant on imports of commodities. Petroleum crude accounts for about 34 percent of the total inward shipments, followed by gold and silver (12 percent of the total imports), machinery (10 percent), electronic goods (seven percent) and pearls, precious and semi-precious stones (five percent), added Dr. Moily.
The Indian gems and jewellery sector is among the most competitive in the world, contributing to 65 percent by value, 85 percent by carat and 92 percent by number of pieces globally, and accounting for more than USD 36 billion of total Indian exports as in 2014-15.In recognition of the business excellence demonstrated by entrepreneurs who make up this industry.
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India is one of the largest importers of gold in the world. India accounts for nearly one-third of the total world demand for Gold. At more than 20,000 tonnes, Indian households hold the largest stock of gold in the world, noted Dr. Moily.
He also said that as per estimates, India is the world's largest buyer of Gold followed by China and both countries account for over half of the global demand. India has an estimated private gold stock of 20,000 tonnes worth USD one trillion, while it mines only around 1.5 tonnes.
About 35 percent of the gold demand in India is for investment purpose and is held in the form of bars and coins.
Dr. Moily said, "40 percent of the world gold stock is lying in India in the form of jewellery and some in temples. The World Gold Council estimates the annual consumer demand for gold will be excess of 1,200 tonnes, at a value of Rs. 2.5 trillion, by 2020."
The gold policy until economic reforms in the early 1990s centered around the major objectives of discouraging people from purchasing gold, reducing domestic demand, regulating supply of gold, curbing smuggling and black income and conserving foreign exchange.
"After the severe Balance of payment crisis during early nineties, there has been a shift in the approach of the gold policy. It was realized that the role of a liberalized and developed gold market was in the interest of consumers and efforts were made to integrate the gold market with financial markets," said Dr. Moily.
He also said that to restrict the rising trend in gold imports, which is adversely affecting India's balance of payments, measures were and are being taken by the government. In order to keep a check on the current account deficit, the UPA government had imposed import restrictions on gold, oil and other commodities. Now the government has come up with two schemes, Gold Monetization Scheme (GMS) and Sovereign Gold Bond Scheme (SGBS).
The Govt. of India has implemented hallmarking scheme to protect the consumer in purchasing gold jewellery of requisite purity, develop export competitiveness and make India a leading market for gold jewellery in the world.
Hallmarking is the accurate determination and official recording of the proportionate content of precious metal in precious metal articles. Hallmarks are thus official marks used in many countries as a guarantee of purity or fineness of precious metal articles. The principle objectives of the Hallmarking Scheme are to protect the public against adulteration and to obligate manufacturers to maintain legal standards of fineness.
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