How to make the gold monetisation scheme work?

Abstract

We’ve to undertake household-level surveys to determine their attitude towards gold, and then focus on a strategy to collect the precious metal. The gold monetisation scheme (GMS), unique in its characteristics and launched for the first time in India, has not been successful. The GMS, including sovereign gold bond (SGB) schemes, has, in two tranches, mobilised approximately 3.7 tonnes of gold from about 3.8 lakh applicants. The response is tepid and mobilisation seems minuscule compared to the nearly 1,000 tonnes that the country imports annually, and holds a stock of nearly 21,000 tonnes. The reasons for the lacklustre response of GMS are manifold and vary from structural issues, and deficiencies in design and dynamics related to economics of gold consumption in India. The reasons need to be contextualised in structural disadvantage where gold is perceived to be more useful than any other asset, as it can be simultaneously used to indicate social status, stored, transferred inter-generationally and, increasingly, even pledged. Gold purchases, especially in jewellery format, have immense everyday cultural connotations, which limit the attraction of GMS. There is a sentimental attachment to gold ownership, depending on reasons for which it was acquired, like marriages, birth of a child or inheritance. This implies that people could be unwilling to convert gold in their possession to any other financial form. In recent years, investments in gold have attained an incredible amount of liquidity, thanks to the increased opportunities to pledge it as collateral when and where required. A few years of continuously rising price (2009-13) added to this lustre. Read more at: https://www.financialexpress.com/opinion/how-to-make-the-gold-monetisation-scheme-work/211879/