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Modi launches gold schemes, coin with Ashoka Chakr

Millions of people in India, who have been traditionally buying gold, will have more than one option to invest in the precious yellow metal this Diwali.

Prime Minister Narendra Modi on Thursday launched three gold schemes — gold monetisation scheme (GMS), sovereign gold bonds and the gold coin bearing the national emblem Ashoka Chakra on one side and Mahatma Gandhi’s image on the other — to channelise the country’s idle gold into productive use by bringing it into the formal banking system.

Describing the schemes as “sone pe suhaga” (icing on the cake), Modi said gold has often been a source of women’s empowerment in the Indian society, and these schemes will underscore that sense of empowerment. “Women usually don’t own anything. House, car is usually named after their husband or son, but gold is their strength.”

He added that gold coins would be a “matter of pride for the nation,” and people would no longer have to depend on foreign-minted gold bullion or coins.

Underlining that India, which has around 22,000 tonnes of idle gold lying with households, has no reason to be described as a poor country, Modi said, “People should take advantage of the golden opportunity to help India march to a golden period.”

While the GMS will allow resident Indians to deposit their household gold and earn an interest of up to 2.5%, sovereign gold bonds are intended to convert the investment demand for physical gold into paper demand, fetching an annual interest rate of 2.75%. The earnings from the monetisation scheme would be exempt from capital gains tax, wealth tax and income tax.

The move would also help in reducing imports of the metal. Every year, India imports an average 1,000 tonnes of the yellow metal, which impacts the India’s foreign exchange reserves and puts pressure on the current account deficit — the difference between the inflows and outflows of a foreign currency.

Finance minister Arun Jaitley had announced the decision to launch the GMS in Budget 2014.

According to estimates, Indians buy about 300 tonnes of gold bars every year, purely as an investment asset.

The gold bonds will be sold through banks and designated post offices. The interest on these bonds will be taxed according to the provision of the Income Tax Act and capital gains tax will also be applicable.

Modi also spoke of the great bond of trust that the family goldsmith enjoys in India. He said that once they gain familiarity with these plans, they could become the biggest agents of the schemes.

“These policies are a step in the right direction,” said A Didar Singh, secretary-general, Ficci.

Hindustan Times, new Delhi, 6th Nov. 2015