Why does the Govt keep its eye on the gold which Indian households own?
Most women and retired people we spoke to are pretty miffed that the Govt is now looking at the gold held by people to save the country. That call, during the freedom struggle made sense and all contributed without compunction. But today, expecting that people’s gold will come out and help save the economy is not going to happen. Many feel that already their incomes have been hit due to lower interest rates and with the fear that banks are going bust, gold has become the only asset class they all trust. And getting them to part with it, even if the Govt gives a higher interest rate or makes the Gold Monetisation Scheme (GMS) super duper attractive, the gold is not going to come out.
Either the Government does not know the psyche of the Indian households or it is a scheme purely for the benefit of the temples. Its either naivety or stupidity; one cannot understand how at all the Govt thinks this would work. Private gold stock in India is estimated at 25,000 tonnes which is worth Rs 110 lakh crore and the Govt is now using its thinktank to come up with schemes to get this gold out.
Well, to begin with, that gold is not going to come out any time. Try convincing your mother to let go of her gold ornaments, deposit it in a bank and earn interest. She will drive you away like a pest and if you tell her that the gold will be melted and she will not get her jewelry back but melted gold at the end of one year, she will swat you like a fly. So the moment you know that the gold you give will get melted, is reason enough to put off many households.
And the biggest reason why it will not take off with households – fear of the tax man coming knocking. It is no big secret that all the black money in India goes into realty and gold. So when the tonnes of gold is bought from black money, what makes the Govt think they will bring it all out in the hope of “whitening” the money? No way. Past record shows that such voluntary disclosures, even though with a promise of no future hassles, almost always come to haunt like a ghost from the IT office. Thus sheer fear of getting caught will dissuade 90% of the people from bringing out the gold. And what happens if half your gold was say, inherited from your grandmother? How do you explain all this to the tax man? Yes, depositing the gold for most will be akin to putting out shark bait.
But yes, the Govt can probably make GMS more attractive for temples like Tirupati, Shirdi Sai Baba, Siddhivinayak and others around India. Devotees donate tonnes of gold and the temple sits idle on them, not gaining anything. Tirupati has invested a part of the gold in SBI’s similar gold scheme. For them, this is God sent scheme, to earn money on the donated gold. And temples have huge amounts of gold- at least that will come out and reduce the import burden to that extent. By the way, the interest rate needs to be lucrative or else the temples will also bless the scheme; SBI’s scheme offers a pitiable 0.75% to 1% interest, little wonder that it has collected even more pitiable quantity of gold.
The temples would be happy but will the people who donate this gold like the temple doing this? Many devotees believe that they are donating the gold to God Himself and not to any temple trust. So for these devout, to know that their gold is not going to God but being melted and earning an interest which goes to the Trust will, could break their faith in this form of donating gold. Well, if temples over a couple of years start noticing a drop in gold donations, you know what happened and what will happen.
Well, for now, let’s hope that at least all the gold in the temples come out. Household gold? Now that’s like trying to snatch away a bone from a dog…try it and you could get bitten.