Foreword by Shri Ratan P. Watal - | NITI Aayog NITI Aayog | Government of India 5 Report of the...
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Foreword by Shri Ratan P. Watal Principal Adviser, NITI Aayog and Member Secretary, EAC - PM
Recognizing the criticality and untapped potential of the gold market for providing a stimulus to exports, economic growth and employment, a Committee on Transforming India’s Gold Market was constituted by NITI Aayog under my Chairmanship, to recommend measures for Transforming the Gold Market Ecosystem in the country. The Committee brought together diverse stakeholders from across the gold ecosystem, including representation from the concerned Ministries /Departments of the Government of India, RBI, industry associations and academia.
The Committee met three times during the last three months and also enabled in depth consultation with a wider group of stakeholders, through sub-groups formed on seven themes. The themes were: Current Industry Profile, Market Segmentation & Estimating Trends for Gold Market in 2022 including Bullion Exchange, Trade and Investment Issues – Incentive Structure & Ease of Doing Business, Regulatory Framework for Gold, Tax Issues, Gold in the Financial System and Digital Payments, Bridging Skill Development and Employment Generation & Technology Upgradation. Various experts also enriched the sub group deliberations.
The Committee deliberated upon the current status of the Gold Ecosystem, Issues, Challenges and Opportunities and Strategic Options for Transformation. The challenges were emerging from a regulatory framework, policy design and the constraints in the augmentation of the domestic supply of gold. The Committee recognised the immense opportunities in the gold export market with the prospect of generating employment. It was also recognized that there was a lack of comprehensive official data on several aspects of the industry, including employment, number of jewellers, the reach of the gold monetisation scheme and the extent of bank participation in the scheme. An industry of such magnitude requires consolidated data at one place. For effective analysis of the gold industry and its performance, an online databank is needed, providing data on all aspects of the industry, including physical gold and digital gold products.
The major recommendations of this Committee, evolved through the above process, are structured into five key focus areas. These are Make in India in Gold; Financialization of Gold; Tax and Duty Structure; Regulatory Infrastructure and Skill Development & Technology Upgradation. The major recommendations focus on measures to boost the domestic supply of gold to reduce dependence on gold imports, by streamlining policies on gold mining, refining and monetisation. The Committee highlights the need to have greater financialisation of gold for both the investors and the industry.
Currently, the gold industry is fragmented, with multiple regulators, different representative associations and multiple markets, which inhibits growth of the gold market in India. The Committee recommends convergence of regulatory domain and functionary authorities to streamline processes in the creation and functioning of efficient gold markets. This can be achieved through a proposed Gold Board of India. Similarly, a proposed Bullion Exchange for Gold is recommended, that can focus on price discovery and provide an entire ecosystem around both the financial products on gold and the physical deliveries. The growth of this industry would also require adoption of new skills and technology, to promote greater employment in the gold industry- significantly channelized through the MSME sector.
Consumer interest is of the utmost importance and a regulatory framework is necessary for consumer protection. However, it is important to ensure that the framework is an enabling one and that stipulated standards do not restrict the growth of the industry, by making it difficult to do business, but should help enable greater trade.
The Committee also appreciates the comments received on the Draft Report from several stakeholders including the Department of Commerce, Reserve Bank of India, Bureau of Indian Standards, Pahle India Foundation and representatives of the banks and the industry. The comments were examined and several suggestions have been incorporated and synthesized in the Final Report. It is recognized that different
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stakeholder groups may have different perspectives and all suggestions may not form a part of the common ground covered. These have also been appended in the Report.
The draft recommendations were presented to the Vice Chairman, NITI Aayog and also to the Chairman and Members of the Economic Advisory Council to the Prime Minister. I wish to express my deep appreciation to the Vice Chairman NITI Aayog, Dr. Rajiv Kumar; Chairman, Economic Advisory Council to the Prime Minister Dr. Bibek Debroy and the Chief Executive Officer of NITI Aayog Shri Amitabh Kant for their valuable insights, which have enriched this Report.
I would like to thank and extend my sincere appreciation to the members of the Committee, the Chairpersons and Members of the various Sub Groups and all those who enriched the deliberations of the Committee. The task of putting together the key issues, researching the problems, suggesting policy options and developing the rationale for the final recommendations would not have been possible without their efforts. I would especially like to acknowledge the valuable inputs and support received from all the Ministries concerned in the process of formulation and finalisation of the Report, and in particular the Ministry of Finance, represented by Shri R K Mahajan, Member (CBEC), Department of Revenue; Shri P K Das, Additional Secretary, Department of Expenditure; Joint Secretary DEA Shri Govind Mohan; Joint Secretary DFS Shri Madnesh Kumar Mishra; and from the Department of Commerce, Joint Secretary Shri Manoj Kumar Dwivedi and from the Ministry of MSME, Joint Secretary Ms. Alka Arora.
I extend my appreciation to others who also supported the process of formulation of different aspects of the Report and Sub Group Reports. The Committee was ably supported by Shri Ajay Mehra, Co Chair FICCI Gems and Jewellry Committee, who made an immense contribution by consolidating the material of the sub-groups. The Committee also benefitted from the comments received from Shri Swaminathan Gurumurthy. The process of report formulation benefitted from inputs received from Shri Ashish Chauhan, Managing Director, BSE and his team of experts led by Dr. Vardhana Pawaskar and Shri Anand Sethuraman.
I also wish to place on record my appreciation for the dedicated support provided by the NITI Aayog and EAC -PM team- Dr. Yogesh Suri, Adviser, NITI Aayog (Convener of the Committee) and Ms. Deepika Shrivastava, Senior Consultant, NITI Aayog and their valuable contribution to the formulation and finalisation of this Report. The support provided by Shri B.N. Satpathy, Senior Consultant MEITY and Co-Convener of the Committee for the formulation of this Report is appreciated, as is the support provided by Shri Suneet Mohan, Young Professional, NITI Aayog and Dr. B. Bishoi SRO NITI Aayog. It is possible that I may not have been able to list all the names of those who have contributed to this Report, as Committee members have individually benefited from several consultations. I acknowledge and appreciate the contribution made by all to this Report.
In conclusion, this Report provides policy makers with suitable inputs for designing and implementing appropriate interventions for transforming India’s gold market. This Report contributes to the vision of the Honourable Prime Minister for New India by 2022, wherein a transformed Gold Market has the potential to double the contribution of the gold industry to GDP; more than double the exports of gold; enhance employment opportunities, increase FDI inflow and increase the gold market size, without negatively impacting upon India’s Current Account Deficit. This Report also provides a robust foundation for realising the policy intent stated in the Union Budget (2018-19) presented by the Finance Minister, of developing a comprehensive Gold Policy to develop gold as an asset class and outlines the way forward for realising the transformational potential of India’s Gold Market.
Ratan P. Watal Principal Adviser, NITI Aayog
and Member Secretary, EAC-PM
New Delhi Dated: February 22, 2018
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Report of the Committee to Transform India's Gold Market Table of Contents Page
Foreword by Shri Ratan P. Watal, Principal Adviser, NITI Aayog and Member Secretary, EAC - PM 3
List of Abbreviations and Acronyms used in this Report 8
Executive Summary 12 Key Recommendations and Timelines 25
Section Chapter 1: Overview of the Gold Industry
I. Vision for the Gold Industry of India 27 II. Gold Market Overview 31 III. Gold and Current Account Deficit 38
Chapter 2: Make in India in Gold I. Gold Mining 43 II. Gold Refining 49 III. Gold Exports 54 IV. Hallmarking 63 V. Digital Payments 74
Chapter 3: Financialization of Gold I. The Gold Monetization Scheme: The Gold (Metal) Loan 78 II. The Gold Monetization Scheme: Gold Deposits 83 III. The Indian Gold Coin 88 IV. The Sovereign Gold Bond Scheme 90 V. New Financial Product: The Gold Savings Account 92
Chapter 4: Tax Reforms I. Tax and Duty Structure 95
Chapter 5: Regulatory Infrastructure I. The Proposed Gold Board of India 101 II. Proposed Bullion Exchange of India 107