Indians' penchant to buy gold as a savings instrument has proved to be a headache for the government.
Gold imports to India - the world's largest consumer of the metal - pushed the current account deficit to a record high of 5.4 per cent of the gross domestic product in the July-September quarter. To undo this, Finance Minister P. Chidambaram outlined a strategy to lure small investors away from gold into other savings products in his Budget for 2013-14. Here are the salient features:
1) The Rajiv Gandhi Equity Savings Scheme will be liberalised to enable a first-time investor to invest in mutual funds as well as shares over three successive years. The income limit will be raised from Rs 10,00,000 to Rs 12,00,000.
2) A person taking a loan of up to Rs 25,00,000 for his first home from a bank or a housing finance corporation in the next financial year will be entitled to an additional deduction of interest of up to Rs 100,000. This will promote home ownership and give a fillip to a number of industries like steel, cement, brick, wood, and glass, besides jobs to thousands of construction workers.
3) The government will introduce instruments that will protect savings from inflation, especially the savings of the poor and middle classes. These could be inflation-indexed bonds or inflation-indexed National Security Certificates. The structure and tenor of the instruments will be announced in due course.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
