Mumbai, March 2 India's bullion imports over the last 10 years have totalled a phenomenal value. Hold your breath, worth $100 billion.
At the current exchange rate, the value of gold and silver import is equivalent to a mind boggling Rs 4.5-lakh crore. Who says India is a poor country!
Evolving over the years
The accompanying table shows how gold and silver imports into the country have evolved over the last nine years. In the last five financial years alone, gold import value aggregated $69 billion and silver import $4.5 billion.
While world market prices have steadily risen in the last decade (the lowest price of gold was around $252 an ounce way back in 1996), the price movement gathered momentum about four years ago when a flood of easy money and enormous amount of speculative capital started to enter the bullion trade.
Currently, the price is around $1,100/oz. Despite being the world's largest importer and consumer of the yellow metal, India is a price taker and not a price setter.
Following global market
Our market here simply follows price movements in London and New York. Internationally, various factors such as demand and supply, investor interest, interest rates and movement in exchange rate of dollar vis-à-vis other international currencies affect gold prices.
According to the Commerce Ministry, the same holds good in India too. The movement in domestic price of gold in India in the recent period is broadly in tandem with similar movement in international markets, the Government has asserted.
India is generally believed to have a ravenous appetite for gold, given rising incomes and population pressure. Yet, many wonder if this level of expenditure in foreign exchange ($14-16 billion) year after year for importing what is arguably an unproductive asset is justifiable and necessary.
Shockingly, even the Government does not have firm statistics relating to estimated demand and availability of gold in the country. According to the Commerce Ministry, rough estimates place gold demand at 700-800 tonnes.
Source of funds?
One has also heard from time to time suspicion being raised about bullion related transactions and source of funds. Is there an element of money laundering involved in bullion business that runs into several billions of dollars year after year?
Given the humungous amounts of money involved, especially in foreign exchange, it is absolutely necessary to ensure that the import trade becomes more transparent and the Government is absolutely on top of every piece of information relating to this business.
Early November 2009 reports said that the Reserve Bank of India purchased 200 tonnes of gold from IMF for a total consideration of Rs 31,463 crore.
It was under IMF's limited gold sales programme covering 403 tonnes.
The purchase, undertaken as part of RBI's reserves management operations, was an official sector off-market operation and was executed over a two-week period during October 19-30, 2009 at market based prices.
As a result of this purchase, RBI's gold holdings have increased to 557.7 tonnes which is about 6.1 per cent of total foreign exchange reserves.
India is now the tenth largest official gold holding country in the world, according to the World Gold Council.
Source : Business Line