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For Indians, paper gold can't beat the real thing
By Rajendra Jadhav
Reuters
Monday, July 13, 2015
MUMBAI, India -- India is meeting stiff resistance in its drive to make the buying of gold jewellery more transparent and to channel demand into paper gold to stop the metal being used to hide billions of dollars of undeclared "black money."
The jewellery trade says the Narendra Modi government's plans to trace gold deals is unworkable and won't deter holders of black money, or hundreds of millions of Indians outside the tax net, from buying gold to keep their wealth away from the prying eyes of the authorities.
... Dispatch continues below ...
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If the proposals fail, gold inflows will continue unabated in a country that accounts for nearly a fifth of global demand and stymie Modi's effort to create a new asset class that could lure savers and back investments.
To track larger gold deals, this year's budget declared that, from June 1, customers would have to disclose their tax code, or Permanent Account Number (PAN), for purchases above 100,000 Indian rupees ($1,580). But jewellers -- many of whom voted for Modi -- have protested, delaying the new rule.
"No jeweller will refuse to sell just because the customer doesn't have a PAN card. He will find a way to ensure the customer leaves the store with jewellery," said Bachhraj Bamalwa of the All India Gems and Jewellery Trade Federation. ...
Two-thirds of gold demand comes from rural areas where jewellery is a traditional store of wealth. Under Modi, India has opened 160 million new bank accounts but half are idle, suggesting old habits die hard.
And, in a country of 1.25 billion people, only 140 million have PAN cards. ...
Though the formal notification to enforce the PAN card rule has yet to be issued, jewellers have already found ways to beat it, by issuing many small invoices or writing informal receipts. ...
... For the complete report:
http://www.reuters.com/article/2015/07/12/india-gold-idUSL3N0ZN3Z720150712
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