India has got a $5 trillion sleeping giant
India's obsession with gold has always been viewed through two very different lenses. For households, it is a store of wealth and a hedge against
India's obsession with gold has always been viewed through two very different lenses. For households, it is a store of wealth and a hedge against uncertainty and also a symbolic asset passed down generations. For policymakers, it is also a recurring macroeconomic headache because almost all the gold Indians buy has to be imported. India imports with precious dollars most of the gold Indians buy so enthusiastically every year, and that gold vanishes into family holdings. Next year, again India has to import with dollars most of the gold Indians again buy in large amounts, and yet again that gold too vanishes in household savings. This goes on and on. India gets to own a mountain of gold which sits idle in family holdings while India keeps on spending dollars to import more gold.Also Read: Jewellers may be louped in for idle gold mobilisationThe contradiction has become sharper in recent months as gold imports have surged, which means India spending more dollars, pressuring the rupee. The country's external accounts have come under pressure and the value of privately held gold has climbed to unprecedented levels. That is why the government is now trying to revive gold monetisation by bringing jewellers into the process.ET has reported based on sources that the government is considering a plan to allow jewellers to participate in a revamped version of the Gold Monetisation Scheme (GMS) to mobilise some of the precious metal lying idle with Indian households. It will be the first time that the participation of jewellers is being sought to boost the appeal of the flagging scheme since jewellers have customers' trust and ready infrastructure too.Though the revised scheme would look more workable, it will face the same big question: Can India unlock even a small portion of the vast quantity of gold lying idle in homes and temples and channel it into the formal economy, instead of importing fresh bullion every year and paying for it in foreign currency?A mountain of gold outside the financial systemThe scale of India's private gold stock is staggering. Estimates vary depending on methodology, but all point to the same conclusion that Indian households collectively hold one of the world's largest stores of private wealth in gold. According to World Gold Council estimates cited in recent industry studies, Indian households and temples hold around 25,000 tonnes of gold. Other industry estimates place the figure closer to 30,000 tonnes, while some studies suggest household and temple holdings could approach 50,000 tonnes.132156621The value of this stockpile has risen dramatically after the sharp rally in gold prices over the past two years.
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