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Draft gold policy soon to suggest steps to make metal an asset class

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The government of India is expected to shortly release a draft gold policy report that will suggest several measures to develop gold as an asset class and revamp the gold monetisation scheme on the lines suggested by a Niti Aayog report titled “Transforming India’s Gold Market” in February 2018, said two industry stakeholders aware of the development.

They declined to be named as they were part of discussions with the department of economic affairs which will release the draft policy.

One of them said the report could be out as early as the first week of January and open for public comments before a final report is issued. It is, however, unlikely that revision of import duty and Goods & Services Tax (GST) on gold would be considered, given the financial implications of such a move, explained the other person.

Indian gold imports attract a 10 per cent customs duty and jewellery a GST of 3 per cent.

“Traditionally, jewellery provides safety and security for women as well as liquidity under difficult circumstances,” said Rajesh Khosla, consultant to MMTC-Pamp. “From a macroeconomic point of view, however, since India does not produce gold domestically, the Indian economy will always have to pay for gold through exports or capital inflows and therein lies the problem. Further, the industry is largely an informal sector and a high customs duty encourages tax evasion so there is a bit of a tightrope-balancing act to be performed.”

“The gold policy could call for establishment of a bullion bank and a spot gold exchange, which will be positive for the bullion industry,” said Surendra Mehta, national secretary, IBJA.

IBJA pegs India’s gold imports at 691 tonnes in the calendar year through November. This compares with 876.2 tonnes in 2017 and 510.6 tonnes in 2016.

The Niti Aayog report suggests reviewing policies for refining to transform Make in India for India to Make in India for the world. That thought process includes developing an India good delivery standard in gold along the lines of the LBMA good delivery standard.

Courtesy: Economic Times

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