Move over gold coins with images of the queen of England. Come Gandhi Jayanti, Indians can lap up their very own sovereign gold coins, adorned with the image of the Ashok Chakra.
The government has decided to launch the sovereign gold coin from October 2 so that people can easily take advantage of it during the Dhanteras — when the purchase of the yellow metal is considered auspicious — as well as Diwali in November, two sources familiar with the development told FE. The India Government Mint, which operates four mints in the country, will produce the gold coins, they added.
Initially, the India Gold Coin could be priced in step with those sold by different agencies, banks and even jewellers, or slightly higher, taking into account the production costs, one of the sources said. Although a decision on the exact nature of pricing is yet to be made, the premium over the market price of gold coins will likely be minimal, unlike the huge premiums people have to pay for buying the ‘gold sovereign’ of England, he added.
The move was part of a broader government strategy announced in the Budget for 2015-16 to enhance investment options for people and also trim imports of gold to contain their damaging impact on trade balance. Announcing the proposal, finance minister Arun Jaitley had said: “Such an Indian Gold Coin would help reduce the demand for coins minted outside India and also help to recycle the gold available in the country.”
Apart from catering for people investing in usual gold coins or importing the ‘gold sovereign’ of England, even with a premium, it was also felt that despite being the world’s top consumer of the precious metal traditionally (Only in 2013, China surpassed India as the biggest bullion consumer), the country didn’t have a sovereign coin to offer.
Some industry executives also believed that the coins would also promote the concept of ‘Make In India’ globally.
Earlier this month, the Cabinet approved two schemes aimed at monetising household gold and selling sovereign gold bonds, which were also announced in the last Budget. While the monetisaiton schemes aims to tap household gold stocks of around 22,000 tonnes, through the bond scheme, the government wants to shift part of the physical gold purchased every year for investment into the ‘demat’ gold bonds.
Having hit as high as 362 tonnes in 2013, the country’s demand for gold coins and bars dropped by a half in 2014, thanks to a raft of restrictions on the precious metal imports, including a 10% basic customs duty, to contain a runaway current account deficit. In the first half of 2015, the demand for coins and bars stood at just 77.4 tonnes.