Indian minister for commerce and industry Anand Sharma has said the country’s central bank should look into the possibility of monetising its gold to counter the huge current account deficit hitting the rupee hard.
It’s not clear whether he was referring to the 557.7 tonnes of gold held in the Reserve Bank of India, or gold held privately. But in comments to the media earlier this week, Sharma said that “even if 500 tonnes is monetised at today's value it takes care of your current account deficit” - although he stressed it would be up to the central bank to decide what its policy would be.
The government has already increased duties on imports of gold and silver.
At $98bn (4.9 per cent of gross domestic product), India has the world’s third largest current account deficit, behind only the US ($473bn) and the UK ($106bn), according to a report by Morgan Stanley.
Controlling the deficit is one point of finance minister P. Chidambaram’s ten point plan for reviving economic sentiment. India is hoping to reduce it to $70bn (3.7 per cent of GDP) in the current financial year.
Responding to a question in parliament, Sharma said:
I have not said there should be any mortgaging of the gold, or auction of the gold, that is incorrect. I have just said the RBI should look into ... how they can benefit the people, particularly with regard to the bonds or the monetisation.
The Indian rupee has fallen nearly four per cent to a new low of 68.7 against the dollar, and has lost a fifth of its value this year.