Government Actions to Mitigate Rising Gold Prices Amidst Consumer Concerns

Government Measures Addressing Rising Gold Prices

In response to Lok Sabha Unstarred Question No. 1068, the Ministry of Finance discussed the government's approach to the significant rise in gold prices, which surged by 40% over the last year. To alleviate consumer strain, the customs duty on gold imports has been reduced from 15% to 6% in the Union Budget 2024-25. Despite the escalating gold prices, the Reserve Bank of India (RBI) continues to purchase gold to maintain its foreign exchange reserves, although this has a minimal effect on the domestic market. Transparency in gold pricing is being prioritized, with oversight from the Bureau of Indian Standards and the Competition Commission of India to monitor and counteract any anti-competitive behavior. Although there is no specific assessment of how these price fluctuations might affect festive demand or wedding seasons, the government has opted not to impose price controls or subsidies for gold. Moreover, efforts are underway to promote alternative investment options for consumers seeking secure asset opportunities.

Details from the Lok Sabha Unstarred Question No. 1068

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS

LOK SABHA
UNSTARRED QUESTION NO. 1068
TO BE ANSWERED ON 02.12.2024

Increase in Gold Prices

1068. SHRI MANICKAM TAGORE B:

Will the Minister of Finance be pleased to state:

a) Whether the Government has taken any measures to regulate gold prices and prevent artificial inflation;

b) How the Government plans to support consumers affected by the 40% increase in gold prices over the last year;

c) Whether the RBI continues to purchase gold amidst rising prices and its impact on the common man;

d) The Government’s position on reducing import duty on gold to alleviate consumer burdens;

e) How the Government will ensure transparency in gold pricing and prevent cartelization;

f) Steps taken by the Government to promote alternative investment options for consumers seeking safe-haven assets;

g) Whether the Government has assessed the impact of rising gold prices on the wedding season and festive demand;

h) Whether the Government has plans to consider implementing price controls or subsidies to mitigate the effects of gold price increases?

ANSWER

MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)

(a) & (b): The government reduced the customs duty on gold imports from 15% to 6% in the Union Budget 2024-25.

(c) The RBI Act, 1934, outlines the role of the Reserve Bank of India (RBI) in purchasing and selling gold coins and bullion. As of March 31, 2023, gold represented 7.81% of the foreign exchange reserves, increasing to 8.15% on March 31, 2024. This change reflects not only valuation fluctuations but also ongoing acquisitions. Most of the RBI's gold purchases are made in international markets and do not significantly impact the domestic market.

(d) The reduction of the import duty aims to foster domestic value addition in gold and precious metal jewelry, while also making gold more accessible to consumers.

(e) The Bureau of Indian Standards guarantees the purity of hallmarked jewelry, fostering transparency and building consumer trust. The Competition Commission of India (CCI) enforces the Competition Act, 2002, to prevent anti-competitive practices including cartelization, taking action based on received complaints.

(f) The landscape for financial asset investments has expanded substantially in recent years. Financial sector regulators engage in various educational activities to inform and raise awareness among investors regarding opportunities in diverse financial instruments.

(g) & (h): The Government is closely monitoring gold prices but has not conducted a specific assessment of their impact on festive demand. Currently, there are no announced plans for price controls or subsidies related to gold.