ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Wages of Liberal Policies

Wages of Liberal Policies

A sink for unaccounted wealth, it will not be easy to reduce gold imports.

Gold has become the bane of India’s balance of payments. But it is amusing that all important government functionaries, from the prime minister and the governor of the Reserve Bank of India (RBI) downwards, now bemoan Indian society’s appetite for gold without recognising that it is the liberal gold policies of the past two decades that have fed the domestic appetite for the yellow metal.

India, no doubt, has always been the largest consumer of gold in the world. But after the Gold Control Act, 1968 was rightly scrapped in 1990 because it was ineffective, the pendulum swung to the other extreme. From 1991 onwards, a series of measures have been taken to facilitate supply from abroad – restrictions on imports as part of personal baggage, on imports by private trade and by banks were gradually removed and customs duty was reduced by 75%. The government also revealed its intention to establish a Gold Trading Centre and make India a gold trading hub. Towards the end of 2003, after MCX became a major commodity exchange, forward trading in precious metals was permitted and, today, the turnover in gold and silver dominates the futures market in Indian commodity exchanges. All these measures naturally led to a perception that the government did not frown on gold imports.

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