Union Budget 2015 - 16: Jaitley eyes temple gold to address current account woes

Presenting the Union Budget 2015-16, the finance minister proposes to address the problem of India's heavy gold imports that have added to the rise in the country's current account deficits by introducing a gold monetisation scheme under which gold deposits will be sought from charitable trusts, temples and other such institutions or individuals who have large physical holdings of gold.

The finance minister spoke of monetising an estimated gold stock of over 20,000 tonnes.

These will be lent forward to jewellers and other users of gold who can get access to the metal without having to buy more.

The finance minister also proposed to issue of sovereign gold bonds, which will be an alternative to purchasing physical gold. Details of the scheme weren't spelt out.

Both the measures are aimed at lowering gold imports which average over 800 tonnes annually.

The government, which had hiked import duty on gold to stem rising imports and since eased it on persistent demands by the jewellery trade, also may hike import duty to stem imports.

Gold import curbs were imposed in 2013 when India's current account deficit peaked to 6.7 per cent in the third quarter of FY13. These curbs helped to bring down imports and in correcting the current account deficit (CAD).

Recently, however, gold import rules were eased and that led to an immediate increase in gold imports in November 2014. According to the Economic Survey, the CAD in the next fiscal could fall below 1 per cent as global commodity prices are cooling off.

This is an attempt to bring about much needed coherence between physical assets and financial assets.