Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

CONSEQUENCES OF THE GOLD (CONTROL) ACT
• Instead of controlling the gold industry the Act drove the industry underground.
The constraints were considered so excessive that both the trade and the public dealt only in cash, and most
transactions were not officially recorded.
• Growth in the number of gold jewellery retail outlets was inhibited over 27 years.
Obtaining a licence to open a new retail jewellery outlet was difficult. The small number of retail outlets (around 16,000
in 1989) was extremely low in the context of India’s 3,800 cities and towns.
• The trade remained fragmented. No large gold-related business could emerge.
As gold jewellery retailers were licensed to operate from a single location, it was not feasible to establish a chain of retail
outlets, unless managed by a family member who still had to obtain a licence in his own right. Establishing a large
jewellery fabrication factory or a nationwide wholesaling company was also impractical. Throughout the period, the
businesses were small and family-owned.
• As gold could be owned only in the form of jewellery (not bars), gold jewellery became the vehicle for
investment.
Apart from well-crafted jewellery, much crude jewellery (e.g. simple rings and bangles) was fabricated (for sale at a very
low mark-up) so that it could be used more easily as “money”.
• As the gold industry relied entirely on unofficial gold imports, the domestic gold price was highly inflated.
Throughout the period, the domestic gold price was usually 50% or more above the prevailing international gold price.
• The public’s passion for owning gold was reinforced.
34
ROLE OF INDIAN GOVERNMENT
Owning gold and gold jewellery in large quantities became the aspiration of most people as the only way to protect their
savings during a period of high inflation and rupee devaluation.
The Reserve Bank of India has its headquarters in Mint Road, Mumbai.
AN INTRODUCTION TO THE INDIAN GOLD MARKET