Mumbai : The Reserve Bank is in talks with the Finance Ministry for launching inflation-indexed bonds, which can help reduce physical demand for gold, Deputy Governor H R Khan said here today.
The move can also help balance trade imbalances as gold import has been jacking up trade deficit which in turn increases current account deficit.
"We are talking to the Finance Ministry to launch inflation-linked bonds, which can help reduce the demand for physical gold," Khan told the Ficci-organised Asian Financial Cooperation Conference here.
The move can also help arrest imported inflation in the light of the steep fall in the rupee. Typically, according to experts, a 10 percent fall in the rupee leads to a 100 basis points or 1 percentage point spike in inflation.
The rupee has lost nearly 7 percent this fiscal after losing nearly 18 percent in the last calender year.
It can be noted that last year the country imported 969 tonne gold, which contributed to record current account deficit of 4.2 percent.
This year, however, there is some taming in gold import demand and according to the World Gold Council, this is likely to slide to 800 tonnes, thus losing the years of gold-demand dominance to China by a whisker this year.
Both the RBI and the government have been taking steps to reduce gold demand through a series of measures.
As gold imports touched a record high last year, pushing up the current account deficit to a historic high of 4.2 percent in the year, the Reserve Bank has unveiled a slew.
Former Chinese vice premier calls for financial cooperation in Asia
Former Chinese vice premier Zeng Peiyan on Monday made a four-point proposal on financial cooperation between Asian countries.
Zeng, vice chairman of board of directors of the Boao Forum for Asia (BFA), put forward the proposal in his keynote speech at the Asian Financial Cooperation Conference co-organized by the BFA and the Federation of Indian Chambers of Commerce and Industry.
Firstly, currency cooperation should be enhanced, Zeng said, adding that East Asian countries should make the Chiang Mai Initiative Multilateralization more practical and strengthen economic supervision, crisis rescue and prevention.
A cooperative mechanism on Asian currencies with broader coverage can beconsidered when conditions are mature, Zeng said.
Secondly, Asia should diversify channels to finance infrastructure while the Asian Development Bank continues to play an important role in that aspect, Zeng said.
Bilateral or multilateral infrastructure investment funds can be established to invest insuch areas as energy, traffic, telecommunications and urban construction, he said.
Thirdly, Asian countries should improve capital markets, especially developing directfinancing to better serve the real economy and increase the efficiency of using capital,Zeng said.
The region should also improve mechanisms for financial transactions and liquidations,enhance connections and communications between capital markets, and prepare to establish regional rating agencies to provide financial services for capital markets,Zeng said.
Fourthly, Asian nations should expand the use of their domestic currencies in the region, Zeng said.
The governments should sign more bilateral agreements in currency swaps and settlements in local currencies and encourage financial institutions to provideconvenience and related services, Zeng said.
More than 500 decision-makers, regulators and CEOs of large Asian banks, insurancecompanies, financial service institutions and other stakeholders attended the meeting that started Monday.
During the two-day meeting under the theme of "Open Asia, Open Finance,"participants will discuss such issues as global economic outlook and Asian transformation, financing Asian infrastructure through capital market innovation,currency swaps and exchange rate coordination, Free Trade Area and Asian economic integration.
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