Burden of Gold Imports

The volume of gold imports has touched Rs 46,000 crore, most of it for household consumption (jewellery and investment). Thus, over 1.5 per cent of GDP is being diverted into this unproductive holding of assets, at a time when the economy?s domestic saving and investment rates have remained effectively stuck at around 23 to 34 per cent of GDP. It should be possible to restrain gold imports, with a combination of policies that is consistent with an environment of policy reforms. A sizeable increase in import duty and imposition of wealth tax seem to be the obvious candidates. The weaning away of people from gold to financial assets, while it is the answer in the long run, can only be a gradual process. A healthy capital market with vigorous regulations curbing unhealthy practices may go a long way.