GBS, GMS may help gold imports fall 5% in 12-18 mths: ICRA

Gold imports are likely to decline by up to 5 percent over next 12-18 months due to the proposed launch of Gold Bond Scheme (GBS) and Gold Monetisation Scheme (GMS), rating agency ICRA said today. The overall impact of the GBS and GMS schemes is likely to be moderately positive on Indian gold imports over the medium term with imports expected to decline by 3-5 percent over the next 12-18 months, the rating agency said in a report. Recently, the government had approved implementation of the GBS and GMS to help reduce the gold imports.

The GBS and GMS aim to curb investment demand for gold and also mobilise idle gold lying with households. "While we expect the GBS scheme to be relatively successful, the impact of GMS is likely to be limited because of concerns regarding the operating modalities of the scheme," the report said. It anticipates that the low interest rate expected to be on offer under the GMS is unlikely to compensate for the loss of jewellery (financial cost) through melting, owing to the strong emotional quotient attached to the shiny metal.

GBS, on the other hand, provides an alternative avenue for channelling investments into the commodity in addition to generating some additional returns against direct investments into Exchange Traded Fund (ETFs) or gold bars, where returns are linked to price movements alone, ICRA said. Further on GMS, the collections under the scheme is likely to be modest as the sourcing is expected to reach 10-15 tonnes (a fraction of the 20,000 tonnes of idle household gold) within 2-3 years of launch, it added.