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Modi govt's clampdown on black money curbing gold appetite in India, say bankers

Rising real interest rates and better returns from other financial markets are also hurting purchases

India's crackdown on undisclosed foreign assets and income is curbing demand for in the world's second-biggest consumer, while rising real and better returns from other financial markets are also hurting purchases, a banker said.

Although consumption should pick up from now until the end of the financial year, when buys more for gifting during festivals and weddings, weak demand so far has dragged on the global price that has shed nearly 9 percent from a two-year high in July to $1,258 an ounce on Tuesday.

"There is a crackdown on in and many people who were looking at as an for unaccounted income are no longer investing in at all," Shekhar Bhandari, executive vice-president of Kotak Mahindra Bank, told Reuters on the fringes of an industry meet.

Unofficial estimates suggest funds illegally deposited in banks outside the country to avoid tax, known as "black money" in India, account for about 10-30 percent of the country's demand, said Bhandari.

A tax evasion amnesty scheme, led by Prime Minister Narendra Modi, that closed in September disclosed nearly $10 billion in undeclared income.

India's demand has also been hit by higher returns from other asset classes, Bhandari said, with returns on equities and bonds at 12-13 percent dwarfing gold's 0.9 percent in terms of rupees since 2013. Rising real interest rate due to declining is dimming gold's draw as well.

'PATHETIC'

"The returns on in rupees is pathetic," Bhandari said.

"I think it won't be advisable to invest in given current levels where returns are likely to be negative in Indian rupees."

India's imports fell for a ninth month in September as weak retail demand and higher discounts prompted banks and refineries to cut overseas purchases.

But imports in the second half of India's financial year to March will probably be 25-50 percent more than the first half, said Sunil Kashyap, managing director for global banking and markets at Scotiabank.

"With just about two weeks away from now, demand so far looks good. Expectation is that it'll sustain until the end of the year," Kashyap said.

discounts dropped to the smallest in nearly nine months last week as the festive season began.

"If stability of the rupee continues and prices are stable, then we can expect positive trends. But any kind of volatility could hamper gold," said Scotiabank's Kashyap.

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Business Standard
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Business Standard

Modi govt's clampdown on black money curbing gold appetite in India, say bankers

Rising real interest rates and better returns from other financial markets are also hurting purchases

Reuters  |  Mumbai 

Shutterstock
Shutterstock

India's crackdown on undisclosed foreign assets and income is curbing demand for in the world's second-biggest consumer, while rising real and better returns from other financial markets are also hurting purchases, a banker said.

Although consumption should pick up from now until the end of the financial year, when buys more for gifting during festivals and weddings, weak demand so far has dragged on the global price that has shed nearly 9 percent from a two-year high in July to $1,258 an ounce on Tuesday.

"There is a crackdown on in and many people who were looking at as an for unaccounted income are no longer investing in at all," Shekhar Bhandari, executive vice-president of Kotak Mahindra Bank, told Reuters on the fringes of an industry meet.

Unofficial estimates suggest funds illegally deposited in banks outside the country to avoid tax, known as "black money" in India, account for about 10-30 percent of the country's demand, said Bhandari.

A tax evasion amnesty scheme, led by Prime Minister Narendra Modi, that closed in September disclosed nearly $10 billion in undeclared income.

India's demand has also been hit by higher returns from other asset classes, Bhandari said, with returns on equities and bonds at 12-13 percent dwarfing gold's 0.9 percent in terms of rupees since 2013. Rising real interest rate due to declining is dimming gold's draw as well.

'PATHETIC'

"The returns on in rupees is pathetic," Bhandari said.

"I think it won't be advisable to invest in given current levels where returns are likely to be negative in Indian rupees."

India's imports fell for a ninth month in September as weak retail demand and higher discounts prompted banks and refineries to cut overseas purchases.

But imports in the second half of India's financial year to March will probably be 25-50 percent more than the first half, said Sunil Kashyap, managing director for global banking and markets at Scotiabank.

"With just about two weeks away from now, demand so far looks good. Expectation is that it'll sustain until the end of the year," Kashyap said.

discounts dropped to the smallest in nearly nine months last week as the festive season began.

"If stability of the rupee continues and prices are stable, then we can expect positive trends. But any kind of volatility could hamper gold," said Scotiabank's Kashyap.

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Modi govt's clampdown on black money curbing gold appetite in India, say bankers

Rising real interest rates and better returns from other financial markets are also hurting purchases

Rising real interest rates and better returns from other financial markets are also hurting purchases
India's crackdown on undisclosed foreign assets and income is curbing demand for in the world's second-biggest consumer, while rising real and better returns from other financial markets are also hurting purchases, a banker said.

Although consumption should pick up from now until the end of the financial year, when buys more for gifting during festivals and weddings, weak demand so far has dragged on the global price that has shed nearly 9 percent from a two-year high in July to $1,258 an ounce on Tuesday.

"There is a crackdown on in and many people who were looking at as an for unaccounted income are no longer investing in at all," Shekhar Bhandari, executive vice-president of Kotak Mahindra Bank, told Reuters on the fringes of an industry meet.

Unofficial estimates suggest funds illegally deposited in banks outside the country to avoid tax, known as "black money" in India, account for about 10-30 percent of the country's demand, said Bhandari.

A tax evasion amnesty scheme, led by Prime Minister Narendra Modi, that closed in September disclosed nearly $10 billion in undeclared income.

India's demand has also been hit by higher returns from other asset classes, Bhandari said, with returns on equities and bonds at 12-13 percent dwarfing gold's 0.9 percent in terms of rupees since 2013. Rising real interest rate due to declining is dimming gold's draw as well.

'PATHETIC'

"The returns on in rupees is pathetic," Bhandari said.

"I think it won't be advisable to invest in given current levels where returns are likely to be negative in Indian rupees."

India's imports fell for a ninth month in September as weak retail demand and higher discounts prompted banks and refineries to cut overseas purchases.

But imports in the second half of India's financial year to March will probably be 25-50 percent more than the first half, said Sunil Kashyap, managing director for global banking and markets at Scotiabank.

"With just about two weeks away from now, demand so far looks good. Expectation is that it'll sustain until the end of the year," Kashyap said.

discounts dropped to the smallest in nearly nine months last week as the festive season began.

"If stability of the rupee continues and prices are stable, then we can expect positive trends. But any kind of volatility could hamper gold," said Scotiabank's Kashyap.
image
Business Standard
177 22

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