In a move to discourage gold imports that put pressure on the fiscal deficit and focusing on the country’s growth through the precious yellow metal in order to get rid of the “poor country” tag, Prime Minister Narendra Modi on Thursday launched three mega gold schemes — Gold Monetisation Scheme, Gold Sovereign Bond Scheme and Gold Bullion Scheme.
The Prime Minister also unveiled the first-ever Indian gold coin and bullion, bearing the national emblem Ashok Chakra on one side and Mahatma Gandhi’s engraved image on the other side.
As far as gold is concerned, India imports a staggering 1,000 tonnes of gold every year, draining out foreign exchange and putting pressure on the fiscal deficit.
An estimated 20,000 tonnes of gold worth over Rs52 lakh crore is lying with households and temples. In a bid to make productive use of this idle gold, Modi launched a scheme to channelise the yellow metal into the banking system and floated paper bonds to curb gold imports that have made India the largest buyer of the yellow metal in the world.
Describing the schemes as an example of “Sone Pe Suhaaga” (icing on the cake), the PMsaid people should take advantage of these plans and help in nation building.
Encouraging women of the country, the PM also said gold can be an important aspect of women empowerment and they would be the biggest beneficiaries of the new gold schemes. “As gold schemes are focused on the country’s growth, gold bonds will also be more beneficial than physical gold,” he added.
Under the Gold Monetisation Scheme (GMS), banks will collect gold for up to 15 years to auction it off or lend it to jewellers from time to time.
Depositors will earn up to 2.50 per cent interest per annum, a rate lower than bank deposits. With the objective to bring down physical buying of gold, the sovereign gold bonds scheme, which was also launched, would offer 2.75 per cent annual interest rate for gold depositors.
As far as gold coins are concerned, buyers will have to disclose their Permanent Account Number (PAN) and other Know-Your-Customer (KYC) documents.
Initially the coins will be available in 5 and 10 grams and 20-gram bullion will also be available through 125 Metals and Minerals Trading Corporation of India (MMTC) outlets. Observing that there is no reason for the country, which has 20,000 tonnes of gold lying idle with households and institutions, to remain poor, Modi said, with some efforts and right policies India can get rid of the tag of a poor nation.
The minting of coins will also promote the ‘Make-in-India’ initiative of the Government. The Prime Minister spoke of the great bond of trust that the family goldsmith enjoys in India. “Once they gain familiarity with these plans, they could become the biggest agents of the schemes,” he said.
Recalling India’s tradition of savings and the culture of empowering women with gold, he said in a lighter vein, even the RBI Governor Raghuram Rajan will have to recognise the difference between “arthashastra (economics) and grahshastra (home economics).”
Speaking on the occasion, Finance Minster Arun Jaitley also said it is essential to discourage gold imports and the bond scheme is expected to lower demand for physical gold.
Jaitley further said that gold lying idle with individuals can be a personal savings but it does not help in the development of the country. He expressed the hope that the people would take advantage of these three schemes.
As far as the gold monetisation scheme is concerned, earnings are exempt from Capital Gains Tax, Wealth Tax and Income-Tax. There will be no Capital Gains Tax on the appreciation in the value of gold deposited or on the interest made from it.
The designated banks will accept gold deposits under the short term (1-3 years) bank deposit as well as medium term (5-7 years) and long term (12-15 years) Government deposit schemes.
The designated banks may sell or lend the gold accepted under the short-term bank deposit to MMTC for minting India Gold Coins and to jewellers, or sell it to other designated banks participating in the scheme. With regard to Sovereign Gold Bonds, Capital Gains Tax treatment will be the same as for physical gold for an ‘individual’ investor.
The Department of Revenue has said that they will consider indexation benefit if bond is transferred before maturity and complete Capital Gains Tax exemption at the time of redemption.
Meanwhile, reacting to the launch of gold schemes, India Inc felt that it would help push economic growth while bringing down the Current Account Deficit through lower imports of the metal.
“These policies are a step in the right direction and would allow for channelisation of the unutilised domestic gold reserves towards supporting the country’s economic growth,” Ficci Secretary General A Didar Singh said.
“The past few years have witnessed an exponential increase in gold imports exerting tremendous pressure on our current account. With the schemes being rolled out we should be able to reduce our gold imports,” added Singh. #END#
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OF THE GOlD, BY THE GOlD, FOR THE GOlD
***The Government is making an all-out effort to make productive use of an estimated 20,000 tonnes of gold worth over Rs 52 lakh crore lying with households and temples.
***Gold can be an important aspect of women empowerment and they would be the biggest beneficiaries of the new gold schemes, said the PM.
***Under the GMS, banks will collect gold for up to 15 years to auction it off or lend to jewellers from time to time. Depositors will earn up to 2.50 per cent interest per annum, a rate lower than bank deposits.