New Delhi, Aug 3
India's proposed gold
monetisation scheme can prove a win-win for all stakeholders --
government, people and industry -- if it is incentivised and marketed
well, even as the yellow metal will remain an attractive asset,
according to the World Gold Council.
"The scheme will benefit
industry as it will get some extra gold. The government can leverage it
with recycling, transparency and more jobs, while customers will benefit
hugely as it would keep gold as an attractive asset," said Somasundaram
P.R., the council's India chapter managing director.
"Yet, in my
opinion this scheme must be linked to dollar deposits, which when
converted into the rupee equivalent, one will get that value. We have
suggested that the government should strongly incentivise the scheme in
the first few years," Somasundaram told IANS in an interview.
He
said gold monetisation scheme is essentially an organised way of
recycling. Though recycling does takes place in India even now, it is
done in an unorganised manner -- when people want to sell gold.
Monetisation scheme is like institutional pooling or savings.
After
proposing it in the national budget in February, the finance ministry
csme out with a draft of the monetisation scheme for opinion from all
stakeholders in mid-mau. The final scheme is set to be unveiled soon,
officials said.
The scheme proposes to allow people to deposit as
little 30 grams of gold, get a certificate and earn interest. The
objective is to mobilise gold, give a fillip to the gems and jewellery
sector by making the metal available from banks on loan and reduce the
reliance on imported gold.
Somasundaram said if the the
government incentivise the banks then they will pass on more to the
customers and will prove to be a big attraction. "Around a 3-percent
interest rate will be very attractive for the customer, but it also has
to be marketed very smartly."
Global, 33-40 percent supplies come
from recycling. In India, it acounts for 8-10 percent now. According to
the council, the demand for yellow metal in India in 2015 was around
900-1,000 tonnes. Total gold imported in 2014 was 891.5 tonnes.
"Monetisation
scheme says you don't have to sell your gold, keep it with the bank. It
is more transparent. For the government, it promotes recycling which
means if in India's gold demand grows, the additional supply can come
from recycling," Somasundaram said.
Like fixed deposit schemes
one can withdraw the gold or jewellery deposited with the banks under
the scheme and will get the gold, not the jewellery. At the time of
maturity the metal will be replaced either in bar or coin form but not
in jewellery form, he said.
"The interest is in gold terms, not in rupee terms. There's a lot of miscommunications about it."
According
to stakeholders, in India, a third of any jeweller's business is
melting old jewellery for new. This means people are not averse to melt
old jewellery. "They might as well keep it in the bank, earn interest on
that," said Somasundaram.
Giving the global example, he said
among other countries that started a similar scheme, Turkey had started
with it in 2010 and has so far has collected 250 tonnes of household
gold.
But the counci's India chief remained unperturbed by the
the recent downslide in the gold prices, nor did he believe that gold
could be losing its sheen as an investment tool.
"Any asset class
can go through ups and downs, particularly at times like this, when
there are extreme views. Short term factors could have affected gold
price versus the dollar. Now, that should not be extrapulated beyond
what it is," he said.
"If you take last 20 years' data, interest
rates going up does not necessarily mean gold prices have to come down.
It's not the only factor to determine the price. Gold is a significant
asset class and its supply cannot be increased at will. Gold has a
self-balancing nature."
Somasundaram said there was also nothing
unusual about China's recent sale of bulk gold. "Central banks across
the globe have been net buyers for 17 consecutive quarters of more than
100 tonnes of gold."
(Aparajita Gupta can be reached at aparajita.g@ians.in)
