India is
trying to build on the advantage of a falling oil price. A rule of thumb is
that a US$10 reduction in the price of oil helps improve the net trade and
hence current account balance by US$ 9.4 billion[1]. Fall in oil prices has helped narrow current account.
Restraining gold imports will sustain a manageable current account
deficit. Gold imports have fallen below the
high levels seen in 2013. To substitute imports India has announced a scheme by which gold can be deposited in banks and interest earned
The objective of the scheme is to mobilize a
part of an estimated 20,000 tons of gold held by households and institutions in
the country and to reduce India's reliance on the import of gold- attempting to get gold worth
about Rs. 5,40,000 crores (1 billion = 100 crores) into the banking system.
Previous schemes on similar lines have not succeeded. Families are too sentimental about traditional jewellery. They are reluctant to part with family jewellery and at this moment the monetization effort may have a long way to go.
[1]
Economic Survey 2014-15
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| From: Business Standard |
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