Indian Central Bank to stop Indians from buying Gold Coins to stop it's Rupee devaluation

[AsifAmeer]

http://www.business-standard.com/in...-likely-to-impose-curbsgold-coin-sale/478620/


The Reserve Bank of India (RBI) is likely to clamp down on gold coin sales by banks, amid rising bullion imports adding pressure to the current account deficit and weakening the rupee.

The Banking Regulation Act does not allow banks to trade in commodities and they play the role of a financial intermediary. This norm was relaxed in the pre-2008 era when the country saw a dollar influx that resulted in a sharp appreciation of the rupee. To sterilise dollar inflows, banks were allowed to sell gold, as they imported the yellow metal. The measure was temporary.


Banks were allowed to sell gold by importing it to fight the excess dollar flows. By the same logic, the measure should be reversed now as we are at the opposite end of the spectrum. It was a temporary measure, which unfortunately was made permanent by banks, a top RBI official said.

The rupee has depreciated 30 per cent since August amid the sovereign debt crisis in the euro zone, which made investors flee to safer havens. Weakening macroeconomic fundamentals like the fiscal and the current account deficit have resulted in investors pulling out from the Indian market.

In its recent interactions with bankers, the central bank sounded its discomfort over the practice of banks pushing gold coin sales and asked them to go slow. However, banks have not stopped the practice of incentivising their staff to push gold sales, as they earn a margin of Rs 100-150 per gramme of gold sold.

Gold and silver imports were around $61.5 billion as of March-end a growth of 44.4 per cent during 2011-12 as against 43.5 per cent in 2010-11. In 2011, India imported 969 tonnes of the yellow metal compared to 958 tonnes in the previous year, according to data compiled by the World Gold Council. In value terms, imports in 201-12 were around $60 billion. However, according to data released by the government, gold and silver imports in April and May 2012 came down sharply to $4.3 billion, compared to $9.2 billion last year.

RBI Governor D Subbarao had earlier said the central bank was looking into the issue of rising gold imports and formed a committee headed by an executive director-rank officer to examine the reasons.

IMPORTS OF GOLD AND SILVER

• April-December 2009
  $19.26 billion
• April-December 2010
  $29.50 billion
• April-December 2011
  $45.76 billion

Source: RBI

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Just wanna Congrat Indians for doing what I have been asking the Pakistanis to do for the last year now! Smart move!

 

[alimohsan52]

When the rupee depreciates this in theory is good for exporters, however it is bad for importers because the imports they buy become more expensive, and this also leads to imported inflation.

Countries like China have been known to manage their currency.

 

[Keepinformed]

When the rupee depreciates this in theory is good for exporters, however it is bad for importers because the imports they buy become more expensive, and this also leads to imported inflation.

Countries like China have been known to manage their currency.

Good for short term until the employees start asking for salary increases as the low value of ones currency starts impacting on the costs of production.

 

[AsifAmeer]

Just over the weekend I started writing an article about Myths in Economic and Financial History. Devaluation boosting economy via exports is an Illusion. Just like you said Devaluation boosts exports but at the same time makes imports expensive. Suppose your economy imports raw material and than exports value goods. Due to Currency devaluation, raw material gets expensive and exports are sold at the same price which are now more competitive. This causes Margin compression. Plus currency devaluation moves purchase power out of the local currency. Have you read my article on the Dollar? Read my second last comment on this article too..

http://blogs.tribune.com.pk/story/10374/how-the-mighty-dollar-weakens-the-rupee/

When the rupee depreciates this in theory is good for exporters, however it is bad for importers because the imports they buy become more expensive, and this also leads to imported inflation.

Countries like China have been known to manage their currency.

 

[gazoomartian]

When the rupee depreciates this in theory is good for exporters, however it is bad for importers because the imports they buy become more expensive, and this also leads to imported inflation.

Countries like China have been known to manage their currency.

Actually Ali bhai, I manage my currency the best way and better than China. I spend it all

:lol::lol::lol:

 

[alimohsan52]

Actually Ali bhai, I manage my currency the best way and better than China. I spend it all

:lol::lol::lol:

Love you chachoo Gazoo:P​

 

[only_truths]

Countries like China have been known to manage their currency.

A small correction. They control not manage. India is trying to manage in a free market economy.

 

[Bombaybuz]

No matter how far they can go No matter how much they gonna try ... this interest base economic system is based on false grounds and bound to parish rather sooner then later ... its not just the case or panic button for India or Greece and Italy but ... for the whole planet ... evil multinationals, confiscation of natural resources, black markets ... false invoices, kick backs, subsidies, inflation, bank corruptions and bail outs ... this is just part n parcel of this false economic mayhem. and if someone else claims the control of this universe then it just can't last any longer.