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Gold Control Act, 1962

Author : Rtn. Gangaram Shamdas Purswani(P.H.F)

India was the world’s largest gold market prior to 1962 and Bombay was the main trading center. Khudabadi Sonara  community whose traditional occupation (gold smith) was manufacturing Gold Ornaments, were very happy and doing very well in business, earning handsome money. After Indo-China War in 1962, due to loss of foreign exchange reserves, the govt. of India enacted the Gold Control Act, 1962, prohibiting the citizens from holding Pure Gold Bars and Coins. The old holdings in pure gold had to be compulsorily converted into jewelry and that had to be declared. Only licensed dealers were allowed to deal in pure gold bars and coins. New gold jewelry purchases were made of either recycled or smuggled gold. This legislation killed the official gold market and a large unofficial market sprung up dealing in cash only. The gold was smuggled in and sold  through the unofficial channel wherein, many jewelers and bullion traders traded in smuggled gold. A huge black market developed for gold. Gold Smith was unorganized labor force and could not cope with the new developed situation. Only a few could get the license to hold the gold, that also in very small quantity, with the result that the members of Khudabadi Sonara community, who were depending only on their traditional occupation of manufacturing gold ornament, lost their business and their financial condition deteriorated and families shattered.

With the efforts of the Puj Khudabadi Sonara Panchayat, Sindhi Swarankar Association, Jaipur was formed in the year 1966, to establish uniform tariff for making gold ornaments. All Sindhi Swarankar of Jaipur were its members. Shri Mangharam Fatumal Vasnani of Khudabadi Sonara Community became its first president. The Sindhi Swarankar Association fought with the Govt. and get allocation of a large piece of empty land in Ram Nagar (Shastri Nagar), Jaipur, calling it “Swarankar Colony” and distributed a piece plot, measuring of 200 sq. yards to each of its members, free of costs, to combat the adverse effects of Gold Control Act 1962.

In 1990, India had major foreign exchange problems and was on verge of default on external liabilities. The Indian Govt. pledged 40 tons of gold from their reserves with the Bank of England and saved the day. Subsequently, India embarked upon the path of economic liberalization. The era of licensing was gradually dissolved. The gold market also benefited because the government abolished Gold Control Act in 1992 and liberalized the gold import into India on payment of duty of Rs. 250/- per ten grams. The government thought it more prudent to allow free imports and earn the taxes rather than to lose it all to unofficial channel. From official imports of practically nothing in 1991, India officially imported more than 110 Tons of gold in 1992, which now stands about 800 tones in a year.

In September 1999, the Govt. of India launched a Gold Deposit Scheme to utilize the idle gold and simultaneously give a return to gold owners and reduce the country’s reliance on imports. This scheme flopped. The people of India have seen the historical behavior of their government with regard to gold and therefore they trusted the natural stability of gold and its bright future in personal possession.