The Gold (Control) Act, 1968

Devaluation of the Indian rupee also leads to steep rises in food commodity prices due to costlier petroleum products imports.

Licensed dealers were not supposed to own more than 2 kg of gold, depending upon the number of artisans employed by them.

Desai believed that Indians would respond positively to these steps and stop consuming gold and help conserve precious foreign exchange.

In 1990, India had a major foreign exchange problems and was on verge of default on external liabilities.

The Indian Government pledged 40 tons gold from their reserves with the Bank of England and avoided defaulting by securing a loan to recover.

[2] by Finance Minister Madhu Dandvate and liberalized the gold import into India on payment of a 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.

[13] During good monsoon years, Indian government can sell its gold reserves at higher price catering to the gold demand from rural areas, to finance the surplus food grains purchase obligation at minimum support price (MSP) and the supply of adequate imported fertilizers to farmers.

Gold trading daily turnover in the international commodity exchanges (NYMEX, TOCOM, HKMEx, DGCX, etc.)

[17][18] India imports in excess of 1000 tons annually (including unofficially smuggled gold) with negligible local production.

Alarmed by the huge trade deficit in the year 2012, GoI introduced moderate customs duty (below 10%) on gold imports.

Imposing customs tax on gold imports in India or devaluation of Indian currency, led to the softening of its international price but remained range bound in rupee terms.

[23] This multiple malpractices by importers and exporters artificially widen the official trade deficit by three folds of the actual trade deficit subjecting Indian currency constantly at the risk of devaluation and de-rating of India by international rating agencies.