{"id":2335,"date":"2018-04-19T17:18:10","date_gmt":"2018-04-19T16:18:10","guid":{"rendered":"https:\/\/www.ukbullion.com\/blog\/?p=2335"},"modified":"2019-02-21T12:58:01","modified_gmt":"2019-02-21T12:58:01","slug":"how-indias-new-gold-policy-could-affect-your-gold","status":"publish","type":"post","link":"https:\/\/www.ukbullion.com\/blog\/how-indias-new-gold-policy-could-affect-your-gold\/","title":{"rendered":"How India\u2019s New Gold Policy Could Affect Your Gold"},"content":{"rendered":"

The Indian gold market gets a fair amount of attention on this blog. And for good reason \u2013 as the global gold market\u2019s biggest customer, what happens in India certainly doesn\u2019t stay in India when it comes to gold. The impact of supply and demand means that trade in the precious metal in India has\u00a0far reaching\u00a0effects on the global gold price.<\/span><\/p>\n

We\u2019ve written before about the fluctuations of the gold price during the Indian festivals of\u00a0Akshaya Tritiya<\/span><\/a>\u00a0and\u00a0Diwali<\/span><\/a>, and written about how important sales in the\u00a0rural Indian economy<\/span><\/a>\u00a0are to trade.<\/span><\/p>\n

But even these trends pale in comparison to the effect of the most recent developments in the Indian gold market.<\/span><\/p>\n

In February, the Indian finance minister announced a range of proposals to revolutionise the way gold is traded across the country, as well as separate promises to drastically improve the incomes of those most likely to buy it.<\/span><\/p>\n

Shortly after, the\u00a0World Gold Council<\/span><\/a>\u00a0(WGC) published a report into the potential impact of these significant reforms. Here\u2019s everything you need to know about what could happen next.<\/span><\/p>\n

Background on the Indian gold market<\/b><\/span><\/p>\n

As we\u2019ve mentioned before, India has a strong cultural attachment to gold. Despite this, the Indian government hasn\u2019t always encouraged its trade as well as other countries. In fact, back when the country first gained its independence, the purchase and manufacturing of gold were actually banned altogether.<\/span><\/p>\n

The situation improved over the coming decades. Manufacturing gold under 14 karats was permitted, and private citizens were permitted to own gold again, but only up to a certain limit. This situation prevailed until the end of the 20<\/span>th<\/sup><\/span>\u00a0century.<\/span><\/p>\n

Unfortunately, since 2012 government policies have moved back in the opposite direction. In a bid to regulate the country\u2019s gold market once again, the government increased taxes on imported gold from 2\u00a0per cent\u00a0all the way to 10\u00a0per cent. Needless to say, this had a significant effect on the price of\u00a0gold,\u00a0and has been connected to an increase in black market purchases and smuggling.<\/span><\/p>\n

The next year, a further law was passed that decreed there must be an 80:20 ratio of gold bullion to jewellery imported, significantly distorting the supply chain.<\/span><\/p>\n

New proposals signal a liberal market<\/b><\/span><\/p>\n

The announcements in Finance Minister Arun Jaitley\u2019s most recent budget suggest that things might start to move back in the right direction over the coming months and years. Of course, the proposals are no guarantee of anything \u2013 but it\u2019s an encouraging signal that government attitudes towards the gold market are becoming more favourable.<\/span><\/p>\n

Here are the three main changes that the government proposed:<\/span><\/p>\n