In the past two months and in November so far, import of gold has remained high and the monthly average has been over 100 tonnes. As the government is contemplating several restrictions to control this, Rajesh Mehta, Chairman of Rajesh Exports says restrictions on gold imports in India have never worked and have promoted illegal activities, tax evasion and smuggling. He suggests a two-pronged strategy to reduce consumption and dis-incentivise holding gold. Excerpts from an interview with Rajesh Bhayani:
Gold imports are rising. In October, it was estimated at 120 tonnes…
Imports should be seen on the a basis, net of exports which was according to me only 70 tonnes in October. Rest was for exports, and imports by export-oriented units. Putting restrictions on imports will not help. It will only increase smuggling, take business off the books and the organised sector will suffer.
There are reports of star and premier trading houses, like yours, importing large quantities of gold.
Trading houses never hold or hoard stock but sell it immediately after buying as they do not want to take a risk with the price. They import when underlying demand is high.
Is there a way to control gold import by putting restrictions like 80:20?
First, there is a need to reduce gold consumption. Consumption is high due to demand by the people for jewellery and demand by large show rooms for stocking, as they want a variety of designs to remain competitive.
Today, many large showrooms have inventories of around several hundred kilos and even a tonne of gold. I suggest the government should bring this stock out and put limits for show rooms beyond which they should not be allowed to keep stock.
The stock limit should be as low as only 10 kilos. Time period of only three months can be given. This will results in hundreds of tonnes of gold coming out in coming months without being imported. Second, the Prime Minister and other leaders and also religious leaders should together appeal public not to buy gold. This will have better impact then restrictions on imports.
There is also a need to a scheme to bring gold lying with public to bring out and use that for lending to jewellers.
But imports may still remain high?
If consumption reduces, overall demand will come down and government should also focus on increasing domestic production as India has gold reserves which can be mined.
Simultaneously Indian companies should be encouraged and incentivised to acquire gold mines abroad and bring that gold to India. At present several mines are available at attractive prices.
