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To: Alan Whirlwind who wrote (12681)	6/6/1998 7:29:00 PM
From: lorne	Respond to of 116820

This news a couple of weeks old. Government may use gold reserves for financing the core sector Our Bureaus in New Delhi The government is exploring the option of utilising the gold reserves lying with the Reserve Bank of India (RBI) -- the central bank -- for generating investible resources for infrastructure financing. The matter currently being debated in the highest echelons of government may be announced in the Union budget for 1998-99. The government has already sounded out several eminent economists in this regard, say top sources. "It (utilisation of gold reserves) is certainly an issue. But it is too early to say whether there would be a policy change in this context," senior government officials said when contacted for comment. It has been pointed out in certain quarters of government that the gold reserves lying with the RBI have depreciated very sharply in the last one year, following a crash in international gold prices. The reserves, which were valued at $4.6 billion in March 1997, were worth only $3.4 billion at the end of March this year. In this period, gold prices have dropped from over $400 to $300 per troy ounce. The last-time India utilised its gold was in 1991, when it pledged confiscated gold with a clutch of international banks to raise $300 million to meet the country's debt-service obligations. In the second leg, overseen by Manmohan Singh, the government moved 7 per cent - under the RBI Act, 15 per cent of the gold reserves can be invested abroad - of the Reserve Bank of India gold reserves abroad. In fact, finance minister Yashwant Sinha who had overseen the first-leg of that operation in his stint in government in 1991, strongly defended the decision at a recent seminar organised by the Federation of Indian Chambers of Commerce and Industry (Ficci). "I say it with a sense of sadness, because then and today nobody stood by me," he said before going on to add, "We would have become a basket case if India had defaulted on her external repayment obligations then". Officials pointed out that India can at present invest the gold reserves vested with the RBI. "The process is complicated, but it can be done," they said. So it is not clear as to whether the government would go in for a recast of the relevant statutes under the RBI Act, to facilitate investment of the reserves. The Bharatiya Janata Party-led coalition, which is looking to kick-start the economy through substantial investments in infrastructure in the forthcoming union budget, is strapped for want of funds. In a year, in which economic growth will not pick-up substantially, enhanced revenue receipts would be hard to come by, say officials. As a result, the government is expected to place greater emphasis on other means of fund raising. This include an accelerated disinvestment programme. Already, in the interim budget the Centre has earmarked the divestment proceeds at the level of Rs 50 billion.