Nat’l gold policy needed to contain losses: SBI Report – The Times of India

Mumbai: A State Bank of India research report has called for a long-term national gold policy that defines gold’s role, as money or as a commodity, and aligns it with broader financial reforms. The report said such a framework should link to India’s plans for capital account convertibility and encourage investment through the monetisation of idle gold. It added that the policy must harmonise how gold is treated in national income accounts, the balance of payments, and capital account to eliminate inconsistencies in accounting practices.According to SBI’s economic research department, high domestic demand for gold and India’s heavy import dependence with imports accounting for around 86% of total supply has created persistent pressure on the current account deficit. The increase in international price of gold is closely tied to rupee depreciation with the rupee coming under pressure every time gold prices rise because of heavy imports. The Govt also faces a fiscal loss of about Rs 93,284 crore on outstanding sovereign gold bonds, following a sharp rise in gold prices. These challenges are worsened by the lack of a comprehensive long-term policy to integrate gold’s treatment across accounting frameworks.To reduce smuggling and deepen the formal market, earlier reports proposed liberalizing gold and silver imports, including easing rules for NRIs. They also suggested introducing forward trading to allow price hedging.