Will the new gold monetisation scheme glitter? - The Hindu

Will the new gold monetisation scheme glitter? - The Hindu


June 8, 2015
New Gold
Monetisation Scheme
refers to C R L Narasimhan’s article “Will the new gold monetisation scheme
glitter?” (Financial Scene, June 8). The straight and honest answer is ‘YES’.
Once upon a time a Review Committee at the national level concluded that
‘Cooperation has failed, cooperation must succeed!’
This season, except among economists, some consensus is emerging about the need
to make the new gold scheme win. I have no reason to think that the move to
unearth at least a part of the estimated domestic stock of over 20,000 tonnes
of gold announced by the government is just another game the government is
playing. The move has in its background the need to reduce gold import, the
intention to account money being invested in gold and gold jewellery and the
noble objective of making a dead asset live and productive.
Even assuming a large portion of domestic gold stock is in the
form of jewellery(including those held with various organisatios in the private
sector) , the need to monetise and make productive at least a part of it is
better understood by policy makers than at any earlier occasion. By
discouraging the present efforts of the government, we may slowly force
ourselves into a trap, when the country will have to adopt draconian measures,
as was done in US long ago. We can now avoid such an eventuality by encouraging
proper accounting and standardisation followed by part-monetisation of a
substantial portion of domestic gold stock.
Celebrity economists/analysts have recently argued that ‘after
all, even if you succeed in making people deposit gold in banks, banks will
have to ‘import’ gold when gold deposits mature’. This argument does not hold
good, as such an eventuality may not arise, once a floating stock of a decent
quantity of gold is built up, and once the scheme becomes a live reality,
continuous inflow of deposits will take care of the quantity of solid gold for
meeting maturity liabilities(many may withdraw cash equivalent of gold, as they
may need cash for other investment options or for meeting other needs.
Another aspect is lax law enforcement in regard to collection of
tax or other levies. This is applicable to other commodities and even real
estate and need to be taken care of by the government.

, Mumbai


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