Section I Introduction
Background News
Gold, the precious metal has always been a status symbol from the time immemorial. It has always been the symbol of the riches, affluence and pride for the human society. It is a beautiful, colourful, dense, malleable, ductile and indestructible matter besides being scarce in terms of its presence in the nature. The above properties of the gold makes it most wanted commodity in the world. Gold has long been considered the most desirable of precious metals, and its value has been used as the standard for many currencies. Gold has been used as a symbol for purity, value, royalty, and particularly roles that combine these properties.
It influences the events in the global economy. It is one of the most sought after investment portfolio. It expressed as a symbol of love and affection across many regions and families of the world. It carries memories across generations and cultures. Gold has provided an important store of wealth to diverse investors, from individuals to institutions, for centuries. The history of gold is very much the history of civilisation. From the time that early man found the first grains of gold, this sparkling yellow metal has fascinated mankind. Wars have been fought over it, women have adored it, and men have killed for it and longed to own it.
Gold and the Indian Economy
India is the world’s largest single consumer of gold, as Indians buy about 25% of the world’s gold, purchasing approximately 800 tons of gold every year, mostly for jewelry. India is also the largest importer of gold; in 2008, India imported around 400 tons of gold. Indian households hold 18,000 tons of gold which represents 11% of the global stock and worth more than $950 billion. The annual consumption of gold which was estimated at 65 tons in 1982, has increased to over 800 tones presently about 80% is for jewellery fabrication (mainly over 22 carat purity) for domestic demand, 15% for investor demand and barely 5% for industrial use.
The Indian Government recently (November 2015) launched three gold related schemes, including ‘India gold coin’ bearing Ashok Chakra, gold monetisation and gold bond schemes to tap the festive season ahead of Dhanteras and Diwali.
The gold monetisation schemes (GMS) aims to tap household gold stocks of around 22,000 tonnes, the sovereign bond scheme would help shift part of the estimated 300 tonnes of physical gold bars and coins purchased every year in the country for investment into the demat gold bonds.
Lauding the launch of three gold schemes by Prime Minister Narendra Modi, World Gold Council (WGC) said the initiative would expand consumer choices and help the economy.
Section II Present Schemes
The three schemes announced by the government are
Sovereign Gold Bond
Instead of buying gold in physical form investors can park their money in bonds which are backed by gold. The bonds will be available both in demat and paper form. Sovereign Gold Bond has more or equal advantage against the physical gold. The bond will be issued by RBI on behalf of the Government of India. The bond would be restricted for sale to Investors (resident Indian entities) who can buy a minimum of 2 units or 2 grams and a maximum at 500 grams per person per fiscal year.
Gold Monetisation Scheme
Resident Indians (individuals, HUF, trusts, including mutual funds/exchange traded funds registered under SEBI norms) can make deposits under the scheme. The minimum deposit at any one time will be raw gold (bars, coins, jewellery excluding stones and other metals) equivalent to 30 grams of the precious metal of 995 fineness. There is no maximum limit for deposit under the scheme and the metal will be accepted at the Collection and Purity Testing Centres (CPTC) certified by the Bureau of Indian Standards.
Gold coins
-The coins will be available in denominations of 5 and 10 grams. A 20 gram bar or bullion will also be available. About 15,000 coins of 5 gm, 20,000 coins of 10 gm and 3,750 gold bullions will be made available through MMTC outlets.
Details of the Schemes
Sovereign Gold Bond
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