"Here's an interesting proposal from India regarding using domestic gold to curb imports and manage the current account deficit. Hmm. A friend forwarded this e-mail to me in November. I can't remember anyone who is negative on gold at this time. Hmm. I have a significant portion of my portfolio invested in PMs, but I am sleeping well. Thanks for a fabulous service."
David Fuller's view Thank you for your kind words and the
from Bloomberg, the first portion of which appears immediately below:
India, the world's largest bullion buyer, should mobilize idle gold lying with its citizens to curb imports and lower a record current-account deficit, according to the All India Gems & Jewellery Trade Federation.
Households and temples carry about 25,000 metric tons and a successful plan to gather at least 10 percent of the gold reserves for lending to jewelers will ensure supplies for three years, Bachhraj Bamalwa, chairman of the federation, which represents about 300,000 jewelers, said in a phone interview. The plan should be run by the central bank, which can help India halt imports for three years, he said.
India is grappling with the highest ever current-account deficit, the broadest measure of trade, mainly because of its gold and crude oil imports, weakening the rupee to a record against theU.S. dollar. The central bank is mulling a gold investment plan to curb the deficit, Deputy Governor Subir Gokarn said last month. Imports climbed to a record 969 tons last year, according to the World Gold Council.
"The only way India can reduce its dependence on imports is to tap the gold lying with individuals and temples," Kishore Narne, head of commodity and currency at Motilal Oswal Commodity Broker Pvt., said in a phone interview. "By doing this, the country can reduce influx of gold at these high prices. Appetite for gold is never going to diminish."
My comment - Hmm indeed! This is an issue of trust, or I should say lack of trust over centuries. Therefore blaming gold imports for India's current account deficit and soft currency may be self-serving for a few, but it really misses the point about confidence in governance within the country.
India's government should praise the removing of restrictions on gold ownership. Any change in this policy would reflect very badly on standards of governance. Incidentally, we have seen these lapses in governance regarding gold in all other countries at various times throughout their history.