Aiming to check demand for gold, Finance Minister P Chidambaram on Thursday proposed inflation-indexed bonds and modified Rajiv Gandhi Equity Savings Schemes with a view to make financial instruments more attractive.
"The household sector must be incentivised to save in financial instruments rather than buy gold. Increasing savings and their optimal allocation for productive uses lead to higher economic growth," he said while presenting the Budget.
Besides, he proposed a tax exemption of Rs 100,000 for first time home buyers for purchasing property up to Rs 25 lakh (Rs 2.5 million) between April 1, 2013 and March 31, 2014.
"This will promote home ownership and give a fillip to a number of industries like steel, cement, brick, wool, glass etc., besides, jobs to thousands of constructive workers," Chidambaram said.
Seeking to make financial instruments attractive, Chidambaram said, "In consultation with RBI, I propose to introduce instruments that will protect savings from inflation ... These could be Inflation Indexed Bonds or Inflation Indexed National Security Certificates".
"The income limit will be raised from Rs 10 lakh to Rs 12 lakh," he said.
Chidambaram also outlined the need to curb import of gold to check the widening Current Account Deficit (CAD).
"My greater worry is the CAD. The CAD continues to be high mainly because of our excessive dependence on oil imports, the high volume of coal imports, our passion for gold, and the slowdown in exports. This year, and perhaps next year too, we have to find over $75 billion to finance the CAD," he said.