Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

ROLE OF INDIAN GOVERNMENT
GOLD CONTROL RULES 1963 AND THE GOLD (CONTROL) ACT 1968
HISTORICAL PERSPECTIVE
To explain the growth in the Indian gold market since the repeal of the Gold (Control) Act in June 1990, it is
important to understand how the market had been constrained over the previous 27 years.
The story begins on 10 January 1963 when a comprehensive range of Gold Control Rules were promulgated as part of the
Defence of India Rules 1963. The Government’s objective was to inhibit unofficial gold imports and the consumption of gold
by imposing severe bureaucratic constraints not only on the trade but also on private owners. By December 1963, control
over the domestic trade and distribution of gold was firmly established.
In 1965, Parliament endorsed the Government’s policy underlying the Gold Control Rules through the Gold (Control) Act
1965, but before the Act could be brought into force, the Government recognised the need to modify some aspects.
Modifications - including the withdrawal of a 14 carat purity restriction on gold jewellery applied since 1963 - were then
included in the Defence of India (Fourth Amendment) Rules 1966. Rather than amend the Gold (Control) Act 1965, a new
Gold (Control) Act 1968 was enacted in September 1968.
TRADE STRUCTURE
The Act grouped gold market participants into 5 categories:
• General public
• Licensed refiners
• Certified goldsmiths
• Licensed dealers
• Registered artisans
All categories were controlled by Gold Control Officers based in 30 “Collectorates” around India.
In summary, the role of each category was prescribed as follows:
General public: Permitted to buy gold “ornaments” only, i.e. gold jewellery for the purpose of adornment. They were no
longer allowed to own or buy gold bars or any non-jewellery articles. Individuals had to declare the extent of their gold
ownership if it exceeded 2000 g, and families if it exceeded 4000 g. Any change in the amount owned over these limits had
to be notified.
Licensed refiners: Restricted to melting, refining, assaying and making of bars for the trade only. They could buy and sell
primary gold but detailed records of all transactions had to be submitted to the authorities. They were not permitted to
make, repair or polish any gold article or “ornament” (i.e. jewellery) or sell bars to the public. As a result, all major
refiners closed down and the 49 licensed refiners (at 1989) were small operations mainly involved in melting and assaying.
Certified goldsmiths: Only self-employed individuals were certified. They could buy gold bars from a licensed refiner or
dealer, could receive gold for manufacturing purposes from a licensed dealer or the general public, but could not buy or sell
any jewellery, article or primary gold. They could not engage more than one hired labourer, and the labourer was not
permitted to make, repair or polish any jewellery. Officially, most goldsmiths became contract workers to dealers or
merely refashioned old gold jewellery provided by the public. The constraints also ensured that almost all Indian jewellery
remained handmade. At 1989, 379,883 individuals were certified.
Licensed dealers: The term “dealer” covered all entities involved in buying or selling gold or gold jewellery among trade
counterparties or gold jewellery with the public, although most were jewellery retailers. However, other entities were
included in this category: wholesalers and manufacturers (dealing in gold in some way or employing artisans) had to be
licensed as dealers. There were many constraints: they could deal only on the premises specified in the licence, they could
not sell bars to the public, they could have in their possession only gold bars made by licensed refiners - the quantity
restricted to a maximum of 400 g if they employed one artisan, rising to a maximum of 2000 g if more than 20 artisans were
employed. All movements of gold, down to the last gramme, had to be officially recorded. Even carrying samples was
extremely difficult. For all dealers, the bureaucracy and restrictions were oppressive. In 1989, there were 16,662 licensed
dealers.
Registered artisans: Defined as a person who was employed or used by a licensed dealer (i.e. not a certified goldsmith)
in order to manufacture gold jewellery, having been supplied with the necessary gold to undertake the task. No figures on
the number of registered (and unregistered) artisans are available. According to the trade, few artisans were registered.
AN INTRODUCTION TO THE INDIAN GOLD MARKET 33