Mumbai, November 17 (NIA): While on the one hand, the Indian government is trying to monetize stowed away gold, the on-going demonetization of INR 500 and INR 1000 notes may result in people investing in gold which cannot be demonetized.
Reuters has reported that officials from the Indian Finance Ministry and the Reserve Bank of India met on Friday to discuss modifying the much-publicized scheme for attracting deposits of three tonnes of gold in four months out of an estimated pool of 20,000 tonnes stacked away in family lockers and temple vaults.
But economic commentator Swaminathan S.Anklesaria Aiyer told Economic Times that demonetization of INR 500 and INR 1000 notes will make people go for gold which cannot be demonetized.
He pointed out that the current demonetization drive by the Narendra Modi government has not only caused enormous difficulties for the urban poor and rural folk because they are still steeped in the cash economy, but will make people turn to gold as that cannot be demonetized.
Aiyar predicted that the demonetization drive will fail to achieve its objective of unearthing black money.
However, the process of monetizing gold is going on. Reuters has reported that the 200 year-old Shree Siddhivinayak temple in Mumbai, has said that it will deposit a portion of its gold hoard with a bank by the end of the month for recycling. It proposes to deposit in a bank, 44 tonnes of the 160 tonnes of gold which it has.
Dozens of rich temples have collected billions of dollars in gold jewelry, bars and coins over the centuries, hidden securely in vaults, some ancient and some modern. Sri Venkateswara Temple, the richest Hindu temple in the world popularly known as the Tirupati Temple, said at the end of last year, that it could deposit more than 5.5 tonnes under the monetization program.
India’s annual imports run to as much as 1,000 tonnes, accounting for about a quarter of the annual trade deficit.
Apart from monetization, last year Prime Minister Narendra Modi also launched a gold bond program to soften demand for physical gold.