Gold monetisation scheme to help in curbing imports, say experts

Himanshu Vatsa | The Dollar Business

The proposed gold monetisation scheme, aimed at recycling of jewellery and bringing them into the market system, will ultimately help in reducing the country’s gold import bill, say experts. The Finance Ministry is in the process of bringing in a scheme, under which people will be encouraged to deposit their gold jewellery in banks and recycle them for future use. Experts believe that such a scheme will enhance the supply of the precious metal domestically and traders may need to import less quantity from abroad. Although the monetisation scheme is aimed at reusing the idle household gold, it will help in cutting the import of the yellow metal in the long run. “The first intent of the scheme is, the gold that is sitting idle must come into productive use. As more and more of it comes into productive use, naturally there will be an impact on import. How much; time to tell,” said Rajesh Khosla, Managing Director of MMTC-PAMP India Pvt Ltd., a joint venture between Switzerland-based PAMP SA and Indian government-owned MMTC Ltd which operates gold processing facilities in India. “The scheme is intended to take a non-productive asset and make it a productive asset. In the process of making it a productive asset, you may see a short fall in import. There is an indirect impact, not a direct impact,” Khosla told The Dollar Business. Analysts forecast that since good monsoon has brought hopes of better productivity, gold demand in rural areas is expected to increase by October-November. “With monsoon concerns having receded, we’ll have to wait for Diwali. If the harvest is good then gold comes back,” Somasundaram PR, Managing Director of World Gold Council, said on the sidelines of the International Gold Summit organised by the ASSOCHAM (Associated Chambers of Commerce in India) in New Delhi. Asked about the possibility of increase in gold imports, he said, “During Diwali, it should increase.” He said India has not witnessed substantial increase in its gold imports over the past two years. Last year the total import was 900 to 1,000 tonnes. It was 850 a year ago. So, it was not a substantial increase. Also let’s not forget, there can be destocking” he added.    

July 29, 2015 | 6:45 pm IST.