Following the Centre’s move to mobilize gold stash into bank deposits has reportedly found favour with the ally Telugu Desam government which has directed the Tirumala Tirupathi Devastanams to deposit its gold ornaments and coins under the scheme.
The Tirumala temple (of Balaji) is the richest Hindu temple in the world and devotees offer nearly one tonne worth gold every year to Lord Venkateswara and the 5,000-year-old temple has already deposited most of its gold in the banks.
Prime Minister Narendra Modi’s plan to recycle idle gold into gold biscuits and deposit them in banks for an interest rate of 2.5 percent has failed to attract many followers as gold reigns supreme in a country of gold-loving women. From future savings viewpoint too, many believe in keeping gold stashed at home than buying financial instruments despite government-owned banks standing security to them.
So far, the gold monetisation scheme has received just one kg in a month out of a total hoard of over 20,000 tonnes, said Reuters in an estimate. If the TTD decides to go for the scheme, nearly 5.5 tonnes of gold will get into the banks earning 2.5 percent interest with no hope of the temple authorities requiring it.
The government hopes the melted gold, once put into circulation, will stop gold imports which are making a dent into the country’s trade deficit as 28% of imports constitute gold, next to petrol imports.
“It’s a good scheme. We have already issued a directive to go for the scheme,” said Yanamala Ramakrishnudu, finance minister of Andhra Pradesh.
However, other temples are not forthcoming with equal magnanimity. Mumbai’s 200-year-old Siddhivinayaka temple, is not buying the idea, said Reuters report, citing loss of gold when melted and deposited in banks.
If the scheme fails to take off, the government is planning to ban gold imports altogether, thus raising the prices of gold in the country, which may even result in smuggling.
Gold imports have become the bone of contention for every finance minister of India. Congress government’s P. Chidambaram had sought to increase import duty almost six times in less than the last two years of his term, while his successor BJP’s Arun Jaitley is giving similar hints at curbing gold imports.
It remains to be seen how the government yields to outside pressure to bring down its gold reserves, both public and private. After China, India is the country with largest gold stashed in individual possession, which gives nightmare to the world Bank and IMF, owing to its value in terms of any financial meltdown.
It is a known fact that while many Western nations might succumb to global financial crashes, China and India can withstand the crisis owing to their enormous private gold possessions.
A recent Thomson Reuters report showed that India has surpassed China as the world’s largest gold consumer. According to the Gold Fields Minerals Survey(GFMS) Gold Survey in the third quarter of 2015, the consumption of gold in the first nine months of the year 2015 in India has been 642 tonnes whereas that in China has been 579 tonnes.
The increased demand was attributed to a fall in the prices of gold in the recent months, despite the government’s move to introduce gold monetization schemes. Currently, there are three gold schemes introduced by the Modi government — Gold Monetization Scheme (GMS), Sovereign Gold Bond (SGB) Scheme and Indian Gold Coin programme to reduce reliance n gold imports by encouraging households to monetize their gold.
These three gold schemes were announced in the Union Budget 2015-16 were launched on 5th November, 2015 and the gold deposits under the schemes not even reached one tonne while the estimates show that the country has 20,000 tonnes of gold.
The deposited gold will be melted by the banks and they issue Indian Gold Coin of 24 karat purity with 999 fineness which is minted indigenously. It has the Ashok Chakra engraved on one side and the face of Mahatma Gandhi on the other.
However, the scheme has failed as it entails no new tax benefits, nor any incentives from the government in a country where women are considered more possessive about their gold ornaments than their husbands (sic).