Gold as a mode of investment has always been a favourite with Indians. Be it a marriage or festival, our penchant for possessing the yellow metal has never subsided. But such was the rush to buy this discretionary item when Prime Minister Narendra Modi made the demonetisation announcement on 8 November that India's imports of gold for November was estimated to be at a whopping 100 tonnes of gold. And this came in a month when the government was making a bid to flush out black money and fake currencies from the system.
Looking at the spike in gold imports, several recent reports suggested that black money hoarders could have made a beeline to convert their unaccounted wealth into purchase of gold, especially, post the note ban, a News18report said.
The estimated 100 tons of gold import in November is the highest for this year and accounts for a fifth of the 500 tonne of this precious metal imported in the current year so far, the report said.
“In the four hours between the Prime Minister’s announcement and midnight on November 8, gold was selling in the informal markets at Rs 50,000 to 55,000 per 10 grams when the normal price is around Rs 30,000,” News18 reported quoting Ravi Singh, Research Head at SMC Commodities Trade. “This price, along with the level of imports, is an indication that black money was being converted,” Singh added.
In fact, gold imports had contracted for eight straight months between February and September before the fall was arrested in October. Gold imports more than doubled to $3.5 billion in October 2016 on account of high festival demand as against imports of $1.67 billion the previous year.
The country's total official gold imports declined to 60 tonnes in April-July of this fiscal, much lower than 250 tonnes in the year-ago period. India, the world's second biggest gold consumer after China, imported 650 tonnes in 2015-16.
Given the current scenario where indications of black money was seen in the conversion of gold, there were concerns about a new crackdown on gold as part of the “war on black money” as promised by Prime Minister Modi.
However, the finance ministry clarified on Thursday through a statement that any gold or jewellery purchased out of disclosed income or out of exempted income like agricultural income or out of reasonable household savings or legally inherited which has been acquired out of explained sources will not be taxed.