Former Reserve Bank of India governor Y.V. Reddy has said that it is inappropriate to discourage gold imports while allowing imports of luxury cars and shaving lotions. He said that he became a public advocate of gold in the mid-1990s and had often departed from the official stance on the yellow metal. “I am optimistic about gold’s future, not just in India, but worldwide. There have been interesting developments across the globe that signal heightened significance for gold in the global economy, particularly as a store of value,” he said.
Value terms
Writing in the latest issue of Gold Investor, a World Gold Council report, he said that merely because the demand for gold was traditional, it did not mean that it was irrational or undesirable. “As gold is significantly non-depreciating in its physical form or in terms of value, it provides safety and security for women and, under difficult circumstances, liquidity,” Mr. Reddy observed
“I believe that the government’s current initiatives need to be taken further, culminating in a comprehensive gold policy, that addresses both opportunities and challenges and that focuses on what gold savings can do for India, rather than whether India can do without gold,” he said.
“Public policy with regard to gold should be fair to all, and not imply a bias against tradition or gender,” he said, adding that gold imports met women’s needs.
Noting that government policy now recognised several factors that contributed to gold’s unique status across India, he said that there was a need to ensure that markets developed in an orderly fashion and that consumers were adequately protected. “It is a commodity by definition, but its links with the financial sector provoke central bank concern.”
“Across the board, the government policy is at an embryonic stage. Importantly however, recent developments demonstrate a positive attitude towards gold, a radical departure from the past,” the former central bank governor said.
On the U.S., he said that an inward looking economy with a globally used currency had built in tension.
All major currencies — the US dollar, the euro and the yen, carry high public debt, giving gold an edge as a safe haven. “Global uncertainties, in particular the monetary non-system, and the outdated global financial architecture ...coupled with policies that are less than confidence inspiring, may bring about a new era that gives gold a fresh lustre in the years ahead,” he said.
GST headwinds
Alistair Hewitt, Director Market Intelligence, WGC, however, saw GST posing short term challenges for the industry. Writing in the same report, he said: “Our econometric research into data spanning 26 years indicates that the tax may pose a headwind to gold demand, because it pushes up the overall tax rate that consumers face.”
Published - July 29, 2017 07:30 pm IST
