Page 15 - Bullion World Volume 02 Issue 08 September 2022

Bullion World | Volume 2 | Issue 09 | September 2022

1. Gold demand is always inelastic- aimed at curbing gold imports incentivize gold smuggling, leading
The average monthly import of 2. Gold supply is always elastic-if to additional demand for USD in
gold for domestic consumption is there are supply side restrictions the hawala market, resulting in the
around 60-70 tonnes and another like 80:20 rule for gold imports, appreciation of USD/ depreciation
15-20 tonnes of import for export logistic constraints etc, domestic of INR, arising from the higher
purposes Often, during the 6 gold price premiums may go up, demand for dollar from unofficial
months of festival and marriage and the shortage in supply is offset channels.
season - of April –May, Sept – by higher supply from unofficial
October &, December –January, channels and grey market, that 4. The only practical solution to
the import of gold goes upto above is to say, supply is always elastic, bring down gold imports and
100 tonnes per month, whereas shortages are taken care of by non forex payments is to encourage
in the remaining 6 off season official channels as well, to meet recirculation of domestic/ house
months, import comes down to the highly inelastic demand of 750 hold gold holdings estimated to
10-20 tonnes per month, taking the tonnes of gold per annum. be more than 25,000 tonnes.
monthly average imports to 60-70 Out of this 25,000 tonnes, atleast
tonnes per month. Such being the 3. High import duties incentivize 1/3rd is of investment type coins,
case, extrapolating or interpreting smuggling, also depreciates the bars and jewellery that can easily
a particular months high gold INR-When the official import duties be mobilized for GMS deposits,
imports as a quantum jump in gold are increased to curb gold imports provided there is a comfortable
consumption is a wrong inference or to arrest the dollar outflow for ecosystem for monetizing /
and shall not be a plank / reasoning gold and worsening CAD, as a depositing this old gold, which is
/ criteria to raise import duty, corollary, these high import duties listed as below:

GMS 2015 - problem areas in mobilizing domestic gold for recirculation /deposits
/gold metal loans

No Problem areas in GMS gold deposits Suggestions to incentivize GMS deposits

1 Depositors are ready for deposits under the Govt shall fix a deadline to develop and
GMS 2015. But banks are not ready to accept operate the GMS portal; without an inter bank
GMS deposits, even after 7 years gold transfer mechanism under the GMS portal,
GMS cannot be operated, nor can the collected
There is no software for GMS portal. Govt has gold from a bank be deployed by another bank at
entrusted State Bank to develop the Gms portal another location
software, but there seems to be no updates about
the GMS software. Govt shall fix a deadline for the banks to
appoint nodal officer in every state to operate
Even now one bank is comfortably mobilizing old the GMS :
gold deposits from temples and institutions under Presently none of the bank staff in local branches
the old GDS of 1998, and hence not bothered is aware of GMS, there is no contact person in
about the new GMS 2015. They bypass / avoid the bank to arrange the execution of biparty /
the GMS agents of multiple banks, gold refineries, triparty agreements with gold refineries, cptcs and
Cptcs and BIS licensed jewellers, whose vast net jewellers, let alone giving information to willing
work could have collected several hundred tonnes GMS gold depositors
of old gold, as against the 16 tonnes mobilized by
this bank in all these 24 years Govt shall instruct that each bank shall have tie
up/ executive agreement with minimum 3 gold
refineries 10 cptcs and 50 licensed jewellers
in every state: presently these stake holders
are chasing the banks for tie up, but banks are
ignoring /leaving them in the lurch., unaware that
only such a vast network of collection agents can
mobilize gold deposits from the public.

15