Amid speculations that RBI may buy more gold from the IMF, the Prime minister’s economic advisory panel has said the central bank should wait for some more time before going for another round of purchases.
“Having bought 200 tonnes of gold, they (RBI) might wait. I think there is no particular hurry to buy more. At the moment, I think they have made a substantial increase to the total quantity of gold they have,” Prime Minister’s Economic Advisory Council (PMEAC) Chairman C Rangarajan told PTI.
When asked if RBI bought gold to shore up the value of its reserves in the context of falling dollar value, Rangarajan said, “not necessarily.”
The former RBI Governor said the total amount that has been invested in gold is very small, which does not make a sea changes in relation to its total reserves.
“...they (RBI) might have already shifted in favour of other currencies, but the significant proportion of total reserves will still be kept in the dollar,” he added.
He said the RBI has readjusted in some way the proportion of gold in its total reserves because the quantity of gold has remained constant, while forex reserves had increased.
The 200 tonnes gold buy by RBI constituted only 2.35 per cent of its total forex reserves at 284.3 billion dollars at that point of time and raised the gold reserves with RBI to 557 tonnes.
Rangarajan said, “The foreign exchange reserves of the RBI have been increasing and therefore the proportion of gold in the total reserves has been coming down. So, to some extent they have reversed that by this gold purchase.”
When asked how much reserve RBI should maintain in the form of gold, Rangarajan said,” There is no hard and fast rule, but some proportion of the reserves being maintained in the form of gold is good.”
While the central bank’s Deputy Governor Subir Gokarn evaded a direct reply, saying he is new in his job, when questioned about the rationale behind gold purchase.
Clarifying that he is not speaking as the RBI Deputy Governor, Gokarn said, “On the broader economic perspective, the supply of gold is extremely skewed and the country that doesn’t have its own capital supply of gold which is dependent on trading partners or cross border transactions to get its supply of gold runs a significant risk by making gold the basis of its monetary system.”
There are speculations that RBI may buy more gold, after purchasing 200 tonnes in the month of November. RBI officials remained tight lipped about the purchase.
India had to pledge around 68 tonnes of gold with the Bank of England and Union Bank of Switzerland in early 1990s to tide over balance of payments crisis.