Indians are known globally for
their love for Gold and Gold Products. Common people of India prefer Gold over
any other immovable assets. India has imported around 1000 tonnes of Gold in
2015 & paid around $35 bn for the same. India is also one of the biggest
market for illegal gold trader. The huge holding of Gold by common citizen is neither
helping economy nor adding any value to citizen's earning growth.
We all know that Indian jewellery
sector runs on cash transactions and its impact on economy is unparalleled.Indian Government in an effort to
eradicate Black Money hoarders in any form announced Demonetization of 500
& 1000 currency bills. It is widely known that major chunk of Black Money
are getting invested in Gold.
Post Demonetization, Government
of India announced rationing of Gold per citizen wherein married, unmarried
lady can keep 500 &250 gm respectively whereas any Male can keep 100 gm.If we consider household with 4
family member which include two daughters then its 1.1 kg of Gold one family
can keep.
The impact of the same will be
immediate as jeweller won't be able to sell Gold through Cash transaction.
Every jeweller will be bound to take PAN card of buyer before selling Gold.
Regarding the implementation & monitoring; recent raids on jeweller by
government agencies sent clear message to jeweller to fall in place or be ready
to face music.
On the contrary, GoI will save
valuable foreign currency and balance of payment will improve which in turn will
help falling Indian currency to get stability against basket of currency. It
will help India to demand better rating from Rating agencies which will reduce
country cost of borrowing.
On domestic front, non identified
black money hoarders will think twice before converting black money into Gold.
The tax collection by the revenue department is bound to go up which will help
reducing fiscal deficit.
The rationing will also help
government to kick-start economy as household attained holding threshold will
be left with no option but to invest in other investment tool which is going to
rotate the economy.
In my point of view, through
rationing of Gold holding limit, GoI may get part success in eradicating one of
the biggest holes in the economic cycle.All of the above, higher revenue,
lower fiscal deficit, higher social spending will ultimately create more jobs.
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