Stim­u­lat­ing GROWTH

AS­SOCHAM or­gan­ised its 10th In­ter­na­tional Gold Sum­mit on Septem­ber 22, 2017. Dr. C. Ran­gara­jan, For­mer Chair­man, Eco­nomic Ad­vi­sory Coun­cil to the Prime Min­is­ter of In­dia & For­mer Gov­er­nor, RBI was in­vited to share his thoughts on the gold mar­ket in In­dia

Assocham Bulletin - - ECONOMY -

"De­mand for gold de­pends on mul­ti­ple fac­tors such as in­come, taste and cus­tom, re­turn on gold, in­fla­tion and re­turn on fi­nan­cial prod­ucts. While ef­forts must be made to re­duce the ba­sic at­trac­tion of gold to the peo­ple in In­dia, at least, in the short run, we can start act­ing to re­duce the de­mand for gold as an as­set. Tam­ing in­fla­tion and en­hanc­ing the real rate of re­turn on fi­nan­cial prod­ucts are fun­da­men­tal pre-req­ui­sites for con­tain­ing gold de­mand in In­dia", said Dr. Ran­gara­jan.

Dr. Ran­gara­jan fur­ther said, "to con­tain im­port of gold through quan­ti­ta­tive re­stric­tions will not work. It can also only lead to smug­gling with all the as­so­ci­ated evils.

Tastes do not change eas­ily. We must un­der­stand the fact that gold is an at­trac­tive form of as­set for In­di­ans. Gold jew­ellery has be­come part of the cul­tural ethos. It how­ever also serves as an as­set which can come to the help of the peo­ple in times of need and dis­tress. Gold mon­e­ti­za­tion schemes, if pur­sued vigourously can lead to a bet­ter util­i­sa­tion of ex­ist­ing stock of gold. For this, the pro­ce­dures need to be sim­pli­fied. Un­der th­ese schemes, gold which would have oth­er­wise re­mained idle also earns a re­turn".

Per­haps, tem­ples and other in­sti­tu­tions which have a large quan­tity of gold are the ap­pro­pri­ate clients for this kind of schemes. The at­tempt to mo­bilise pri­vately held gold stocks and trans­fer them into the hands of fi­nan­cial in­sti­tu­tions could at least meet to some ex­tent the de­mand for gold jew­ellery. We could avoid the use of gold as a hedge against in­fla­tion if we can of­fer suit­able fi­nan­cial sub­sti­tutes. In or­der to suc­ceed in con­tain­ing the de­mand for gold, we must act on en­sur­ing that the fi­nan­cial prod­ucts give an ad­e­quate re­turn. Fi­nan­cial prod­ucts in this con­text should cover a wide range from bank­ing de­posits to mu­tual fund prod­ucts.

On the sec­ond quar­ter GDP growth, Dr. Ran­gara­jan said, "some of the rea­sons for slow­down are tem­po­rary or tran­sient fac­tors like in­tro­duc­tion of G5T or per­haps even de­mon­eti­sa­tion. There­fore, I be­lieve that if you look at it, the fourth quar­ter and the first quar­ter have been more or less same-5.6% and 5.7%. But even to get 6.5% for the year as a whole, the econ­omy needs to grow at 7% in the next three quar­ters. So my own es­ti­mate is that for the year as a whole, prob­a­bly the rate of growth will be 6.5%."

On re­cap­i­tal­i­sa­tion bond, Dr. Ran­gara­jan said 'bank­ing sys­tem needs tobe re­cap­i­talised'. In early 1990s, we gave money to banks but they were asked to in­vest it in bonds. It is im­por­tant for banks to be re­cap­i­talised so that they can pro­vide ad­di­tional credit.

The gov­ern­ment is plan­ning to come out with some kind of stim­u­lus, he said, the fall in the growth rate is also ac­com­pa­nied

by fall in in­vest­ment rate and more crit­i­cally, it is pri­vate in­vest­ment rate that is fall­ing. In fact, the pub­lic in­vest­ment rate, or pub­lic ex­pen­di­ture on cap­i­tal, has shown some slight rise, said for­mer RBI gov­er­nor. There­fore, the most im­por­tant thing to ad­dress is the prob­lem that may be pre­vent­ing pri­vate in­vest­ment from ris­ing. There­fore, the pack­age in my opin­ion should be partly to raise cap­i­tal ex­pen­di­ture of the gov­ern­ment but suited in a way that is stim­u­lus pri­vate ex­pen­di­ture as well.

Dr. C. Ran­gara­jan also pointed out that there have been a num­ber of stalled projects. And the low hang­ing fruit is to en­sure th­ese stalled projects are ac­ti­vated, such as those stalled projects vi­able must be im­me­di­ately made op­er­a­tional.

Com­ment­ing about CST, Dr. C. Ran­gara­jan said that CST is a good mea­sure. It is ma­jor step in-in­di­rect tax re­form in the coun­try. Though ini­tially there would be prob­lems in its im­ple­men­ta­tion but the econ­omy would ben­e­fit once it smoothens out.

Mr. Manoj Ku­mar Dwivedi, J oint Sec­re­tary, Min­istry of Com­merce and In­dus­try said, "we are look­ing for­ward to trans­form­ing In­dian gold mar­ket. The gov­ern­ment should make ef­forts to make gold in­dus­try more trans­par­ent and en­hance value ad­di­tion based ex­ports to gen­er­ate em­ploy­ment.

Mr. So­ma­sun­daram P.R., Man­ag­ing Di­rec­tor, In­dia, World Cold Coun­cil in­formed that In­dia has been im­port­ing 900 tonnes of gold a year. In­dia has stock of 24,000 tonnes of gold val­ued at $1 tril­lion. "If we in­clude gold avail­able with banks, value goes up to $1 tril­lion. In­dus­try has gone through fast-paced changes and we car­mot set the clock back. We have to sit with the gov­ern­ment to see­what gold can do for In­dia."

GST is a good mea­sure. It is ma­jor step in in­di­rect tax re­form in the coun­try. Though ini­tially there would be prob­lems in its im­ple­men­ta­tion but the econ­omy would ben­e­fit once it smoothens out.

Dr. C. Ran­gara­jan, For­mer Chair­man, Eco­nomic Ad­vi­sory Coun­cil to the Prime Min­is­ter of In­dia & For­mer Gov­er­nor, RBI ad­dress­ing the au­di­ence.

Mr. S. K. Jin­dal, Chair­man, AS­SOCHAM Na­tional Coun­cil on Com­mod­ity Mar­ket wel­com­ing Dr. C. Ran­gara­jan, For­mer Chair­man, Eco­nomic Ad­vi­sory Coun­cil to the Prime Min­is­ter of In­dia & For­mer Gov­er­nor, RBI.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.