Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

SUMMARY AND POSITIVE FINDINGS
BACKGROUND
ROLE OF INDIAN GOVERNMENT
The Indian Government closely monitors the import, export, distribution, fabrication, retailing and private
ownership of gold – as it has done since 1947.
For 27 years (1963 – 1990), Gold Control Rules and the Gold (Control) Act regulated the domestic market. Private gold
ownership was restricted to jewellery (and coins already in circulation). Owning bars became illegal. Jewellery fabricators
and retailers required licences to operate. Almost all bullion dealers stopped trading – at least officially. To fabricate new
jewellery, the gold industry was obliged – theoretically – to rely entirely on the recycling of old gold scrap.
Since the repeal of the Gold (Control) Act in 1990, the Government has adopted pragmatic policies designed to increase the
share of official (as opposed to unofficial) gold imports, optimise its revenue from Customs duty, stimulate the export of gold
jewellery, improve the overall quality of gold jewellery fabricated in India, and encourage the recycling of gold jewellery in
private hands, notably through the Gold Deposit Scheme.
Important initiatives include the introduction of official gold import schemes, notably the Non-Resident Indian (NRI) Scheme
in 1992 and the authorisation of banks in 1997, the Gold Deposit Scheme in 1999, the hallmarking initiative in 2000, and
on-going support for gold jewellery exporters.
Customs duty on imported gold is currently Rs 250 per 10 g (US$ 16 per oz). Since 1992, it has generated approximately
Rs 106 billion (US$ 2.6 billion). Official gold reserves have increased from 216 tonnes (1970) to 358 tonnes (2001).
ORIENTATION
India comprises 28 States, 6 Union Territories (UT’s) and Delhi as the National Capital Territory (NCT). It is
bordered by 6 countries: Pakistan, Nepal, China, Bangladesh, Bhutan and Myanmar.
The population has grown by 20% since 1991 to 1,012 million. The report groups the States into 4 regions. The north
accounts for 30% of the population. The west, east and south each account for approximately 22 - 25%.
There are more than 700 languages and dialects. 12 languages are important. Hindi is spoken as a primary and
secondary language by 65%, English by 20%. The split by religion is Hindu (82%), Muslim (12%), Christian (2.3%) and
others (3.7%).
The rural population (742 million) accounts for 71% of the population. Urbanisation is gradual. The urban proportion grew
from 26% in 1991 to 29% in 2001. There are more than 30 cities with populations exceeding 1 million.
Gold demand relies heavily on the agricultural sector. Most of the 107 million farms are small. The average size is
1.6 hectares. Only 1.7 million farms (1.6%) are 10 hectares or more. 60% of agricultural workers are employed fulltime or
part-time as hired labourers. Their daily wages range from Rs 50 (US$ 1.00) to Rs 200 (US$ 4.00)
For all States, good rainfall during the monsoon is important. Only 38% of the gross cropped agricultural land is irrigated.
The South West monsoon occurs over a 3 month period (June to early October). Excess rain can cause severe flooding, and
too little rain can cause droughts, in vulnerable States.
GOLD BULLION
Imported gold bars
More than 95% of gold imported for the domestic market is in the form of small cast bars weighing 10 tolas (3.75 oz),
widely known as TT bars or biscuits. Most imported TT bars are produced by 8 major gold refiners in Switzerland, South
Africa, United Kingdom and Australia. In recent years, India has imported 5 - 6 million TT bars annually.
Importers
The official import of gold bullion for the domestic market occurs through two authorised Government schemes: Open
General Licence (OGL) scheme since 1997, and the Non-Resident Indian (NRI) scheme since 1992.
The OGL scheme (20 banks and 4 Public Sector Undertakings are authorised) accounted for 99% of official imports in 2001.
Gold is also imported unofficially. Bullion re-export centres for the Indian market include Dubai, Singapore and Hong Kong.
Since 1990, an estimated 5,246 tonnes have been imported officially and unofficially. In 2001, the OGL share of total imports
was about 90%. 10 international gold dealers, members of the LBMA, supply the bulk of imported gold.
Duty-free gold is also imported officially for re-export as jewellery. An additional 363 tonnes have been imported since 1990
for this purpose. 54 tonnes were imported in 2001.
Imported gold is distributed nationwide through secondary and lower tier bullion dealers that fall below the primary tier of
bank and PSU importers. The most important dealers are located in cities where the State sales tax is low. Notably,
Ahmedabad, Jaipur, Mumbai and Gurgaon, near New Delhi.
AN INTRODUCTION TO THE INDIAN GOLD MARKET 15