The unpredictable gold rate in domestic markets have prompted the Indian government to make changes to its gold policies and regulations. The government will shortly draft a new gold policy that will outline several steps to turn gold into an asset class and bring about innovative changes to the gold monetization scheme in accordance with a Niti Aayog report.
Demand for gold in India has been falling over the past few years, particularly due to government measures and because gold doesn’t appeal to younger customers as it once did to previous generation. This may also have had a hand in forcing the government to change policies.
The news was first broken by two unnamed industry stakeholders who are aware of recent developments. They preferred not to be identified because of their important role in the ongoing discussions with India’s Department of Economic Affairs, which is responsible for the draft policy.
One of the two stakeholders also mentioned that the report could be released as early as the first week of January 2019, and will be available for public comments before the final report is issued. It isn’t possible to tell with accuracy if changes will be made to the “Goods & Services Tax” and “Import Duty” on gold because of their financial implications.
At present, there is a 10 percent customs duty on Indian gold imports and a GST of 3 percent. India does not produce significant amounts of gold on a domestic level, which is why it will have to pay for gold through other means such as exports and capital inflows, which isn’t good for the economy’s growth. The primary uses of gold in India are as liquidity options in difficult circumstances and jewellery for women.
One of the suggested policies for the draft would be the establishment of spot gold exchange and bullion banks, which will support the local bullion industry. India’s gold imports are over 691 tons for the year 2018. This number fell down from 876.2 tons in 2017 but rose from 510 tons in 2016.
The policy is hoped to encourage the creation of new jobs in the metals industry with particular focus on revamping the domestic market for gold and bolster the exports of gems and jewellery, which currently makes up for a large percentage of the total merchandise outbound shipments.
To promote more exports to international countries, the Gems and Jewellery Export Promotion Council (GJEPC) has proposed increasing more incentives for increased shipments. This policy is regulated under the Merchandise Exports from India Scheme (MEIS) to provide duty benefits on different products and countries.
The Indian Ministry of Commerce and Industry will take suggestions from key industry players, following which a task force would be set up to implement the policy in a timely manner. The government may also form a new Gold Board that will be represented by various parties from RBI, SEBI, Ministry of Commerce, and Ministry of Finance.