FICCI and World Gold Council release ‘Why India Needs a Gold Policy’ report

1. Establish an India Gold Exchange to ensure pricing standardisation, increase transparency and improve supply and demand analysis.
2. Establish a Gold Board to manage imports, encourage exports and facilitate development of the infrastructure needed to ensure the Indian gold market functions to maximum effect.
3. Develop accredited refineries in line with international standards including upscaling the current domestic refineries.
4. Allow Indian banks to use gold as part of their liquidity reserves. This would incentivise them to introduce gold-based savings products.
5. Drive monetisation of gold by incentivising banks, revitalise Gold Deposit Schemes, introduce gold-backed investment and savings products.
6. Create a more active marketing strategy for Indian handcrafted jewellery. This could boost exports and highlight India’s expertise in this highly-valued sector e.g. by promoting handcrafted ‘India-made jewellery’ like the Swiss-made watches.
7. Drive the standardisation of gold so that buyers and sellers can have faith in both the quality and price of their products. Introduce guidelines for compulsory quality certification of all forms of gold to encourage accountability and foster an environment of trust.

The report also assesses the policies adopted in countries like Turkey and China; that have faced challenges similar to India and have devised public policies which have monetised the local stock of gold to positive effect.

Dr. A Didar Singh, Secretary General, FICCI said, “Gold has always been an integral part of the socio-economic ethos of the Indian household. The consumption of gold has always been greatly intertwined with the Indian household’s financial planning goals and has, through generations, remained an obvious and natural choice of saving of all households.   Through this report we have re-examined many assumptions around gold and have also suggested ways of monetising this asset. We hope that this report will form the basis for formulating a comprehensive public policy on gold.”

Commenting at the launch of the policy report Somasundaram PR, Managing Director, India, World Gold Council said: “Demand for gold in India is interwoven with culture, tradition, the desire for beauty and financial protection. It would be futile to control gold demand knowing how much the passion for gold drives savings itself. We believe the solution to meeting India’s enduring appetite for gold lies not in restricting the import of gold, but in making better use of the gold that is already in the country, making it a productive fungible asset class like any other financial savings.  The need of the hour is to re-engage all stakeholders to develop a coherent long-term ‘India Gold Policy’ that results in a robust infrastructure for gold, drives standardisation and transparency, encourages gold-based investment products and supports the economic priorities of the country. With India at the centre of the global gold eco-system, it is imperative that we find ways of mobilising and monetising the 22,000 tonnes of gold in Indian households to fund economic growth.”

The recommendations in the report are backed by data driven analytics, for which, the World Gold Council commissioned FICCI, who conducted a widespread survey of Indian consumers to discover why they buy gold, why they sell it and how they would respond to initiatives aimed at monetising gold in India. The survey was conducted with 5000 respondents across India, including roundtable discussions and extensive interviews with stakeholders from the industry.

Key findings of the survey include the following:

• Consumers’ continue to buy gold whatever the fiscal circumstances – 77% of respondents bought gold at least once during 2013 and more than half bought more gold in 2013 than the previous year
• Indian consumers buy gold as an investment as well as an adornment –  77% of respondents bought gold as a safe investment and 53% consider it primarily an adornment; and 50% believe that gold is both
• Gold demand is not dependent on price fluctuations – Among respondents, 19% said they would buy more gold if prices rose and 34% said they would do nothing. Only 14% said they would stop buying gold if prices increased, while just 6% said they would sell
• Gold is an integral part of the family budget – The purchase of gold jewellery and coins comprises 8% of daily consumption of a household, which is only marginally behind medical expenses and education
• Consumers’ attitude towards utilising gold as an investment product – 50% of respondents said they would be willing to deposit their gold to earn interest while a further 12% said they might do so. More than a third of respondents would be willing to deposit 26-50% of gold in their possession while 3% would deposit between 76% and 100% of their gold
• Among the respondents’ savings and investments, gold products lie just behind cash, bank deposits and other mainstream savings accounts
• Consumers’ view on gold monetisation – 49% of respondents said they would be willing to deposit their gold to earn interest, 73% said they were happy to receive different gold from their initial deposit while 62% said they would prefer cash or India branded coins at maturity.