Apparently worried at the increasing import of gold over last few years, Reserve Bank Deputy Governor Subir Gokarn on Sunday said that there is a need to 'dematerialize' gold like any other financial product to reduce its physical imports, the rise of which has been blamed for the high current account deficit that is feared to touch new record high this year.
HUGE IMPORT of oil and gold in the recent months has put pressure on country’s trade deficit which has touched an all time high of $ 21 billion US dollars. The latest projections of the commerce ministry may further enhance the Current Account Deficit (CAD), especially given the increasing imports, a statement made by an official of the Commerce Ministry sometime back.
CAD occurs when country’s total imports and transfers are higher than its total exports and transfers. Ballooning trade deficit has become a major challenge for the country’s economy – CAD had touched a 30 year high of 4.2 per cent of the GDP or $ 78 billion US dollars in 2011-12.
Mr Gokarn made this statement during the concluding day of the recently-held BANCON (All Banks conference). “It (high gold imports) is creating some macroeconomic stresses and so the challenge is to find ways to replicate the financial characteristics of gold without necessarily causing physically importing,” he said.
Last fiscal, there was a 39 percent rise in gold imports and in gross terms, it constituted for 80 percent of the current account deficit, which reached an all time high of 4.2 percent. Mr Gokarn said, adding the net gold imports constitute about 1.8 to 2.4 percent of GDP.
Drawing from a report under preparation, Mr Gokarn suggested four new products which could be introduced to arrest high gold imports:
(a) A modified gold deposit scheme
(b) A gold linked account that will act as a demat account
(c) A gold accumulation plan that will work on the lines of the SIP (Systematic Investment Plan) for mutual funds
(d) A gold pension plan that will encourage people having high gold possessions sell and get returns on liquidation over a long period.
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