India cannot afford to invest in gold import: KC Chakrabarty

BANGALORE: India cannot afford to invest in import of gold in view of negative current account deficit, Reserve Bank of India Deputy Governor K C Chakrabarty today said.

"Gold was an asset 2,000 years ago, when India was rich and contributing 30 per cent to world GDP. Our current account deficit is negative and how can we invest in importing gold: India cannot afford it," a release by IIM Bangalore quoting Chakrabarty said.

Speaking at a panel discussion on Gold and its status in India - at IIMB, he said gold intoxication is prevalent only to India, and society as a whole must work together to change mindsets.

"Stop giving or taking gold as dowry and stop giving gold to temples," he advised.

Maintaining that RBI has never stopped import of gold, he said: "Do not borrow money from banks to import gold."

"Consumer has never benefitted from gold and gold has given a negative return world-wide, it is not an investment but a speculation," he added.

Speaking at the discussion, Amresh Acharya, Director Investment, World Gold Council said "We believe that gold can be part of the solution to the challenges that India faces today and would like to see discussions about how best efficiency of the market can be enhanced by the standardisation of gold."

Suggesting that policy direction should view gold as a strategic asset for India and its citizens, with the objective to mobilise and monetise the nation's gold stock to support economic growth, he said "there lies a strong need to consider the introduction of new gold-backed financial products to unlock the hidden economic value of the gold in the economy."

"There are significant holdings of gold at the grass root level which can be brought into the financial system," he added.

Meanwhile, UPA chairperson Sonia Gandhi, without spelling out her own opinion, had yesterday asked the Commerce Ministry to look into demands made by gems and jewellery exporters for a cut in customs duty on gold and relaxation of a rule linking imports of the metal with exports.

"You are requested to kindly look into the matter (demands of the gems and jewellery industry) for appropriate action," said a letter written by the office of Gandhi to the Ministry of Commerce and Industry headed by Anand Sharma.

Finance Minister P Chidambaram said in Davos yesterday restrictions on gold imports can be rolled back only after the government obtains a firm grip on the current account deficit (CAD).

"Until we have a firm grip on the CAD, I don't contemplate any rollback of any measure," he said, adding that the government will get a full idea of the CAD only when the interim Budget is presented in Parliament.