India: Will the gold for cash scheme pay off?
Mumbai (Jun 3) India sits on a gold mine -literally. The government reckons that Indian households hoard as much as 22,000 tonnes of gold, an estimate that the World Gold Council concurs with. But how useful is all this gold when its monetary utility lies frozen? The government, therefore, has proposed a gold monetisation scheme that will mobilise the idle gold for release into the economic ecosystem.
In the past two years, India imported around 750 tonnes of the yellow metal. Before the government took measures to check the inflow of gold in 2013, more than 1,000 tonnes came in annually, adversely reflecting on the current account deficit. In 2012-13, gold imports cost the country $56 billion - the second largest item on the import bill after crude oil. The new scheme, the government hopes, will help reduce the imports.
Monetisation of idle gold is not a new idea. An earlier gold deposit scheme, in the 16 years since its inception in 1999, has brought 15 tonnes of gold into the open, almost half of it from temples that get the metal from devotees.