Mumbai: Indian Institute of Management Ahmedabad’s (IIMA) India Gold Policy Centre (IGPC) conducted a workshop today, involving key stakeholders to seek their opinions on gold monetization in India. Their opinions will be presented as a whitepaper to the Government of India as an on-ground feedback on the two schemes on gold monetization approved by the Union Cabinet last month. It is expected that gold monetization will not only bring India’s import bill down, but will also cause the price of gold to decrease globally, besides reducing smuggling of gold into the country.
The workshop was attended by eminent bankers, NBFCs, hallmarking agencies, jewellers, gold refiners, trusts, bullion traders, bullion logistics companies, assaying centres, commodity investors, traders, academicians, and economists.
Addressing the stakeholders, Dr. Saurabh Garg, Joint Secretary (Investment), Dept. of Economic Affairs, Ministry of Finance said, “The objective of launching the gold monetization schemes is to mobilize the gold held by households and institutions and mainstream these savings into the financial system so that they are put to productive use”.
The Union Cabinet had approved Gold Monetization Scheme and Sovereign Gold Bonds Scheme in an attempt to mobilize gold held by households and institutions such as temple trusts, etc. to help reduce gold import bill. After crude oil, gold is the second biggest item that India imports. India is the biggest buyer of gold in the world and imported gold worth $34 billion in the fiscal 2014-15. The first five months of the current fiscal year have witnessed gold imports increasing compared to the same period last year.
Internationally, Turkey has been known to have monetized its gold most successfully. Sharing their experience, Mr. Erkan Kilimci, Executive Director, Central Bank of the Republic of Turkey (CBRT), mentioned about the similarities between Indian and Turkish people for their preference of physical gold as traditional investment. Also, a sustained high level of inflation induced households to purchase gold in Turkey. But once CBRT allowed banks to hold a fraction of their reserve requirements, for currency liabilities, in gold and foreign exchange, the banks offered innovative gold deposit accounts to households to unlock their gold. Gold deposit accounts increased substantially by pulling physical gold in to the financial system.
The India Gold Policy Centre — a part of Indian Institute of Management, Ahmedabad (IIMA) and sponsored by World Gold Council — is a Centre of excellence, conducting cutting-edge applied research on the Gold Industry in India and providing insights to suggest ways at both policy as well as execution levels. Speaking at the Workshop, Prof. Jayanth Varma, head of India Gold Policy Centre, said, “This workshop reflected a diverse range of opinions on gold monetization. We are glad that views of multiple stakeholders can be presented to policy makers. If India is able to monetize a small fraction of available gold, it will have a cascading positive effect on various sections of our economy.”