India imports 40% of the World’s total production of Gold, making India as the top importer of Gold metal. India imports approx 1000 tons of Gold per year. The imports are mainly from China, USA, Australia, South Africa and Russia. In India, approx 4000 tons of gold is lying idle in Temples, and approx 15000 tons is in Indian household. Gold imports of India is on the rise. In India Gold has got bot social and economic value. But the social value outweighs the economic one. Possession of Gold is a matter of social prestige. It is used as medium of gift in special occasions. This particular feature is unique and can be seen everywhere in India.
Due to paucity of gold availability in India, Gold imports have negative pressure on Balance of Payments. It increases the import bill and hence affect the Current account deficit. This increase in the deficit affect the exchange rate. It puts pressure on exchange rate. It increases the inflationary tendencies and debt. India’s lust for gold makes people buying more of gold. This savings lie idle and does not circulate. To avert this GoI came up with sovereign gold bond scheme.
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