Restrain your passion for gold: FM

Finance Minister P Chidambaram on Thursday made an impassioned appeal to citizens to check their penchant for gold at least for another year if they wished to see growth return to India. He, however, refrained from proposing more curbs on the yellow metal.

“I have one wish, if people of India can fulfill; that they don't buy gold," the finance minister said.

“What we need to understand is when we buy gold we pay in rupees but the government has to pay in dollars when it imports. Gold is not something we produce, it is entirely imported,” he said, but still refrained from hiking duties further on inbound shipments.

“I don’t want to be too unpopular,” he said, but somewhere it may have weighed heavily on his mind that his zeal to contain demand for the precious metal could weigh against him in the public mind.

Huge gold imports have put undue pressure on the government’s coffers and in turn is affecting the value of the rupee. Economists have calculated that if India’s gold imports halt, the current account deficit will turn into a surplus.

And, the caution from the finance minister comes at a time when net imports have fallen over the past fortnight after the government hardened its policy response to gold imports.  According to official data, gold imports came down to $36 million in the second half of May from $136 million in the first half.

Since January this year, the government has doubled import duty on gold from 4 per cent to 8 per cent to curb demand. The Reserve Bank of India has also put restrictions on banks on importing gold.

Bullion traders, however, reacted to Chidambaram’s appeal in a different manner. According to All India Sarafa Bazaar Vice-President Surender Jain, asking people not to buy gold in India is like asking them to survive without oxygen.

“Is it possible to stop buying something so intrinsic to people’s lives for one year and then start again?” he asked.

Jain noted that the curbs on gold have failed to put a break on demand for the yellow metal in the past many months.

The BJP on Thursday alleged that instead of bringing more foreign investments into India, the government is asking citizens not to invest in gold.