This refers to your editorial “Gold comfort” ( Business Line , January 8). The soaring import of gold and the widening current account deficit (CAD) are matters of great concern. But gold import is not only going up as a matter of investment but also for hiding black money and because of the mania for gold ornaments It is not exactly like the purchase by the central banks and China. The ever increasing price of gold can be tackled only in consultations with countries. Perhaps, it can lead to a new currency regime.
Old methods in curtailing import may lead to smuggling that may be more harmful to the economy. So we have to work out new strategies following others and educating the people. Further, we have to take steps to reduce import of crude oil and edible oil by increasing production. And we need to increase our exports. We have to pay more attention to research for innovations.
Domestic savings
This has reference to the editorial, “Gold comfort’ ( Business Line , January 8). Our economy is a family-oriented one, where household savings are the basic source of national savings. It is a pride to save for the next generation.
Small savings in banks and post offices were the prime source of national savings.
But the government’s policies, such as tax on interest of bank deposits and harassment by income-tax authorities of small investors, led to the diversion of domestic savings to assets such as real-estate and gold. With no stringent tax laws on purchase of gold, small investors made the shift.
Initially the government thought it convenient to encourage FDI/FII as a quick replacement for domestic savings, but the effect of import of gold is being felt now.
Steps should be taken not only to deter gold purchase, but also encourage small savings, by lifting stringent tax laws.
S Veeraraghavan
Madurai