The Tarapore committee felt that liberalising the overall policy regime on gold is vital to the success of capital account convertibility.
There is a strong case for liberalising the gold regime, it said. The committee has also recommended the entry of Indian entities into the international commodities markets.
The committee felt that a restricted import regime on gold provides an added incentive for the parallel economy as the metal always fetches a premium in the domestic market.
However, the committee noted that the large imports of gold in recent years have not put any pressure on the country's balance of payment or the exchange rate of the rupee. It may be just a return flight of capital to the country, the committee observed.
At present, the report says, gold can be imported only in three ways. First, through cannalising agencies.
Second, though returning NRIs and lastly, through special import licences. It sought to do away with the restrictions in three phases.
In the first phase itself participation in international commodity market will be allowed. Moreover, banks and Fis fulfilling defined criteria will be permitted to operate freely both in domestic and international markets.
These institutions can sell gold to residents, offer gold denominated deposits and loans. They can also mobilise household gold and provide working capital gold loans to jwellery manufacturers. They are also free to offer deposits schemes like gold accumulation plans.
In second and third phases, government and the RBI will take steps for developing a well regulated market in the country for gold and gold derivatives including forward trading. Both residents as well as non residents will be allowed to operate in the market.
