Indians should reduce gold tributes to God - RBI Deputy Governor
In order to keep gold
prices under check, the practice of giving gold as dowry or as an
offering at religious places must be curbed, as should gold jewellery
purchases, suggests a senior official at India's central bank.
Posted: Monday , 23 Jul 2012
MUMBAI (MINEWEB) -
Gold offerings at temples have come under the scanner of the Reserve Bank of India. Deputy Governor K C Chakrabarty has called for a reduction in demand for gold as an offering to the deities.
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| Gold jewelry is worn even by the lower castes and forms part of the wedding gift exchange....the elaborate nose ring is a sign of marriage... |
"Wearing gold as an ornament was a culture when you were a rich society, when you were contributing to 30% of the GDP of the world. Today, we have become a poor country, we need to change our culture," he added.
For millions of Indian households which think otherwise, this assertion by Chakrabarty, may come as a shocker. Over the weekend, the deputy governor's remarks made at a function has opened up a Pandora's Box.
For centuries, Indian households have had a twin tradition - buying gold during festivities or on auspicious occasions largely in the form of jewellery, and offering gold to their Gods as a form of appeasement or in gratitude.
Both need to change, said Mr Chakrabarty, stressing on the need for a shift in people's social and cultural attitudes towards gold to cut its demand. This, he feels, will help ease the current account situation, especially "since investing in gold is non-productive".
If Mr Chakrabarty could have his way, he would have Indians donating only 2 carat gold instead of the regular 22 carats to temples. "Yes, if it is of religious value, it is the faith, (then) why do you require ornaments of 22 carats gold? Ultimately, ornament is ornament," he went on to add.
Tonnes of gold is lying idle in the temple vaults across the country with more gold offerings from devotees adding to it on a regular basis.
Going even further to drive in his point, Chakrabarty claimed there was no 'intrinsic value' in the 'speculative' investment of gold. He urged those in the financial world like chartered accountants to explain to the people the non-productivity of investing in gold.
Hitting another nail, he added the precious metal cannot be used for anything productive and gains in value only because of a ``mad rush'' for the commodity among speculators. The day this will end, the price will fall sharply, he said.
It may be recalled that the apex bank had some time ago flagged the business of gold loans and sale of gold coins by banks. In India, availing of loans against household gold ornaments has been gaining ground as a debt concept.
Explaining the logic on which his observations were based, the deputy Governor explained that more than the rich, the poor in Indian society were getting caught in this concept. The poor were purchasing gold and ultimately, they were borrowing on that gold at a high 30%. "...for that, unnecessarily our current account is (suffering)," he noted.
What is perhaps playing at the back of the deputy Governor's mind is the yawning fiscal deficit gap. Imports of the precious metal and oil are only adding to it.
Besides calling for a reduction in the purchase of gold jewellery, Chakrabarty also said there was an urgent need to reduce oil imports. The way to go about this was using more and more bicycles.
India's current account deficit (CAD) for fiscal year 2011-12 was the highest in 30 years at 4.2% of the GDP, primarily driven by expanding oil and gold imports. Even during the economically troubled times of 1991, the CAD levels had stood at 3%. Can the deputy Governor be so off the mark here?
Source: Indians should reduce gold tributes to God - RBI Deputy Governor - GOLD NEWS - Mineweb.com Mineweb
