Restrictions necessary on gold

05 January, 2013

The Reserve Bank of India (RBI) has rightly expressed concern about the increasing craze for gold where gold-import has risen by 11-percent in a year against global rise of just 3 per cent. RBI should take some concrete steps to sharply bring down gold prices by banning forward trading of the yellow metal.

INDIA IS the biggest consumer of gold either as investment or otherwise. As such, gold demand in India determines rise and fall of international prices of gold. It was wrong that Indian government succumbed to political and other pressures while Indian Finance Minister had to take back measures from the Union Budget for 2012-13 which could effectively check use of black money in purchase of jewellery.

Idea of re-introducing maximum 14-carrot gold for jewellery can be re-introduced with 10-percent excise duty on jewellery.

Since most investment in gold is made out of black money, sincere steps should be taken to transform currency circulation in banking transactions so that surplus currency may be ordinary ‘paper’ for all practical purposes.

India should follow sensible advanced countries by discontinuing circulation of higher-denomination notes of rupees five hundred and above because such currency is used as black money to buy gold. All sale-purchases exceeding say Rs 20000, even though payment may be made in parts, must be through banks.

In case of cash-payments, currency-tax @ 30-percent may be imposed. All expenses exceeding Rs 1000 must be allowed when made through cheques/ drafts. Payments of essential services like water, telephone, electricity and municipal taxes for bills exceeding Rs 1000 must be by cheques/ drafts only. Drafts/ Pay-Orders/ Traveller-cheques must carry names and address/ account-numbers of purchasers with reduced validity-period of say 45 days to check their misuse as ‘benami’ drafts for carriers of black money.