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God’s Treasury: Will Freeing Temple Gold Work?

The new gold monetisation scheme is well conceived. But it may find few takers.

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To understand India’s fascination with gold, you must walk around its other obsession; temples.

Be it Tirupati Balaji in Andhra Pradesh, Siddhi Vinayak in Mumbai, Somnath in Gujarat or Kashi Vishwanath in Varanasi, there are glittering spires, intricate gilded ceilings, burnished pillars revealing our unending reverence for the yellow metal.

And there is more (much more) than meets the eye. Secreted away in sanctorums, vaults and ancient chambers are gold bars, coins, encrusted jewellery selflessly donated over centuries by believers.

Now the Modi government wants to put this enormous wealth to good use. A new scheme — green-lighted in the Union Budget — will encourage temples and religious trusts to part with the gold that is lying unproductive in their lockers. Deposited with banks, temples will be able to earn an interest on the bullion while providing local jewellers with a steady supply of their primary raw material.

On paper this is a win-win situation.

As per the World Gold Council, over 2,000 tonnes of gold lies locked away in temples. Freeing it will address the Indian madness for gold, which even a prohibitive import duty has been unable to tame.

As The Economist reports: Indians splurge on the shiny stuff —in 2011 India imported more gold than any other country—about 1,000 tonnes, or a fifth of global annual supply. That is the same amount that sits in the central bank vaults of Switzerland.

The new gold monetisation scheme is well conceived. But it may find few takers.
The carved minaret of the Kamakshi Amman temple, made from a solid gold sheet shines in the sun in Kanchipuram. (Photo: Reuters)

So instead of wasting valuable foreign exchange trying to slake this thirst, unlocking temple gold will allow us to meet the demand more efficiently and domestically. The trade deficit, according to estimates can be cut by as much as 30 per cent because gold is the biggest ‘non-essential item’ on our import bill.

A similar scheme launched in the past did not find many takers. One explanation put forward was the sub-one percent interest rate that was offered. This time around, that will be enhanced and is rumoured to be anywhere between two and five per cent.

But despite an attractive interest rate, The Quint feels that this gold monetisation scheme —like its predecessors—is unlikely to succeed.

This is because gold in India is much more than a store of value or an investment. It is a metal intrinsically woven into religion and Indian social ceremonies. People buy gold on Dhanteras and Akshaya Tritiya not only because they expect a high return but also because it is auspicious.

The birth of a child, the marriage of a daughter or at festivals like Diwali. Gold is auspicious. It is security. It is absolution. Penance for past sins and propitiation for the future. It is a hedge against inflation and a collateral to borrow against on a rainy day.

There is deep-rooted aversion to physically part with gold. It is a metal that is painstakingly hoarded. Gold is a family heirloom passed down generations. The same is true at temples. Any plan to pawn or melt them -- no matter how economically lucrative -- is sure to be resisted. 

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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Topics:  Tirupati   Gold   Somnath Temple 

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