##ial impact on gold prices. on the supply side, mine production during the first 5 years was almost flat, while in the latter half of the decade, it gradually went up. official sector sales recorded substantial increases and amounted to about 450 to 500 tonnes in the year 2000. addition to supply from hedging ranged from a low of 100 to a high of 500 tonnes each year. mining, official sector sales and leasing together have provided reasonable liquidity to the market. as regards demand, data indicates that up to 1995, annual demand on account of jewellery fabrication was of the order of 2, 600 tonnes which zoomed by about 30 per cent in 1997, and in the last 3 years, it averaged 3, 150 tonnes. the most important factor on both the supply and demand sides was that mine production and demand for jewellery fabrication remained flat during 1988 - 2000 on an average at 2, 550 and 3, 250 tonnes, respectively. yet, there has been abundant liquidity. flat demand and declining prices in addition to institutional developments, may have had much to do with the changed attitude of central bankers, particularly in europe. the official sector sales, which amounted to 130 tonnes in 1994, progressively went up and recorded 470 tonnes in 2, 000. more importantly, the official sector leasing, which was just below 1, 000 tonnes in 1991 went up to about 4, 800 tonnes, adding to liquidity in more than ample measure with some impact on the prices. low inflation and soft interest rates in the recent years have brought about a greater sensitivity among central banks regarding returns on their portfolios. the steady decline in gold prices in recent years against the background of low inflation raised doubts in some quarters, on the importance of gold as a safe haven investment and hedge against inflation. some central banks have resorted to off loading substantial quantities of gold, which they held as reserves. another significant development of the 1990s was the spurt in central bank lending of the precious metal. central banks are lending their idle stocks with a view to enhancing returns on reserves, which is bringing in good liquidity to the market to bridge the gap between supply and demand. a notable development in this regard is the signing of the washington agreement by some central banks in september 1999, which has placed an effective cap on such operations of central banks. as a result of the clear trend that emerged in recent years of increased amount of central banks ’ sales as well as lending, the official sector ’ s holdings as a percentage of total above

hallmarking has not gained the desired importance. the low quality of gold jewellery being sold in the country and the resultant losses being incurred by the consumers are being recognized now. recent surveys conducted by the bureau of indian standards ( bis ) jointly with central consumer protection council in 5 major cities reveal that more than 80 per cent of the jewellery being sold in the market was of lower purity than claimed and charged for. in some cases, the gold articles sold were 38. 6 per cent short in purity in monetary terms. the low purity results in a loss of around 16 per cent to gold jewellery. in the recent past, rbi has been actively pursuing the issue of upgrading the quality of trade and products through a system of assaying and hallmarking with government of india and bis. the major objectives of introducing a proper assaying and hallmarking system in the country are enabling consumer protection, developing export competitiveness of the gold jewellery industry, introducing gold based financial products, which will help in mopping up the vast dormant gold resources with the domestic sector and developing india into a leading gold market centre in the world. ministry of commerce had held meetings with the trade representatives in 1997. based on the views emerging out of these consultations, bis formulated a scheme of hall marking in 1998, as a voluntary certification scheme, with a combination of quality certification and bis laboratory recognition schemes. the bis - recognised laboratories would affix / stamp / hall mark jewellery manufactured by bis certified jewellers and bis in turn would maintain the required surveillance. as a culmination of further efforts by all concerned, bis launched the scheme of hallmarking in april 2000 under the bis act, 1986. under the scheme, 12 firms of jewellers have been certified as assaying and hallmarking centres so far. consumer awareness campaign highlighting the advantages of going in for hallmarking jewellery is being conducted by bis. the government of india announced the gold deposit scheme in 1999 and rbi issued guidelines to the banks intending to launch the scheme in october 1999. five banks have launched their schemes under the guidelines and the quantum of gold mobilised so far has been about 7 tonnes. unfortunately, the scheme has not evoked the expected response. a number of reasons can be cited for the low response, prominent among them being depositors ’ losing the making charges spent on jewellery ( as the banks would convert them into primary form before accepting as deposits ), the low caratage of jewellery, low rate of return on deposit ( as seen by the deposit