Govt mulls plans to curb gold imports

NEW DELHI: The government is considering schemes such as gold deposits, gold-linked accounts and pension products to curb demand for the precious metal, blaming its massive imports for the high current account deficit.

The mid-year economic analysis of 2012-13 tabled in Parliament on Monday said that gold-backed products will help the investor enjoy benefits of investment in the metal without investing in the physical commodity.

"We are worried about gold imports...The way to curb holding of gold is to create more attractive financial instruments," the finance ministry's chief economic advisor Raghuram Rajan said.

He said some gold-linked instruments have been talked about by the RBI but potentially there could be other financial instruments to attract investments away from the yellow metal.

The analysis said new gold-backed financial instruments in the form of modified gold deposits and accumulation plans, besides gold-linked accounts and pension products linked with the gold are some measures being considered to reduce the attraction of a direct investment in bullion and jewellery in the domestic market.

It, however, struck a note of caution by saying that these investments would have to be monitored to see whether the overall demand for the metal actually falls.

India is world's biggest consumer of gold and demand for the yellow metal had steadily risen over the past few years, but 2010-11 and 2011-12 saw an unusual rise.