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Nandini Oza
Nandini Oza

GOLD SCHEME

Gold Monetisation Scheme not successful: Survey

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Gold Monetisation Scheme introduced by the Union government has not been successful, a study held by India Gold Policy Centre (IGPC) at IIM-Ahmedabad has revealed. IGPC is a centre of excellence sponsored by the World Gold Council. 

Professor Arvind Sahay, head of the IGPC, said on Monday that the GMS was not successful and that there was a need for a serious rethink so that something could be worked out to make it successful. According to him, there are some systematic and regulatory issues with the scheme and that the banks also need incentives. 

He said that many banks did not have the organisational bandwidth to handle the scheme and that the consumers also needed to be encouraged. Pointing out former governor of RBI Y. V. Reddy's recent remarks that India need a comprehensive gold policy, Sahay said a policy could not be successful unless it could draw from individuals. 

“Temple Trusts cannot provide much,” he felt.

The study—Gold Monetisation in India as a Transformative Policy—was undertaken with an aim to suggest improvisations for a better implementation of Gold Monetisation Policy. The survey was carried across 1,171 households in 10 states that constitute approximately three-quarters of annual national gold consumption. The survey was undertaken in September- October 2016 before the demonetisation announcement.

The study revealed that rural consumers were more reluctant to part with gold as compared to urban consumers, but were ready to pledge gold as collateral, with 74 per cent rural consumers being open to pledging their gold, suggesting “liquidity use” of gold on the basis of requirement. 

High income urban consumers hold a high proportion of their assets in the form of gold, indicating the use of gold for investment purposes, and implying its scope for monetisation. 

The state wise analysis also revealed that Karnataka, Telengana and Tamil Nadu would part with gold more as compared to other states, indicating that these were the most attractive regions for increasing the effectiveness of the policy in both urban and rural regions.

Asked if there was a need to increase the rate of interest for those opting for GMS, Prof. Sahay said that this was one of the things they were looking into in another study that was being carried out.

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Topics : #Gold

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