Well this is about the RBI circular to Hindu temples asking for the value of gold in stock. The circular asked the temple management (Travancore Dewaswom Board in this instance) to take stock of the gold with the temples and report. This is unprecedented. The gold or any other material offered to the temple is out of piety and gratitude by the devotees. It is against natural justice that something offered for a purpose be used for some other purpose without the consent of the giver and taker. Why has RBI sent out such a circular? What is the pressing necessity to undertake such an unprecedented activity? Let us look around for reasons as the doers won't give reasons since they fear their act would be correctly criticized as unreasonable.
While many Hindus oppose this and are raising voice against this, the media is shrewdly holding the secular placard high by reporting the reactions as outcry from few Hindu outfits.
The 'experts say the Gold imports are soaring day by day and thus a large chunk of Forex goes out for the payment. So, they plan to get the gold in the nation and circulate it, to have the import reduced. Well, good thought, if only that is the problem. The moot question is why people invest in gold than any other instrument? A study by RBI to ascertain reasons for the mammoth import of gold all of a sudden states that the people have lost confidence in other investment instruments of the Government and business, and hence they invest in gold.
"The performance of gold against other comparable domestic assets over the last few years is suggestive of the shift towards gold in India also. Returns from gold investment have outperformed other comparable assets on three of the last five years." This is what the report starts with. The report goes on with "Demand for gold appears to be autonomous and a function of several influences and factors in India and may not be strictly amenable to policy changes."
The report suggests as a demand reduction measure for gold as follows,"It is necessary to introduce savings schemes and instruments that can provide real returns. The dominant reason why a person may like to hold his savings in the form of gold is to secure hedge against inflation. Therefore, offering real rate of return considering the high inflation rate prevailing, as an incentive on a financial instrument would better address the issue of excessive clamour for gold imports. Therefore, products analogous to Inflation Indexed Bonds may be considered as alternatives."
So, the Lender of the last resort is of the view that the investment instruments offered right now are worthless of investing and a clean up is the need of the hour. If people get something better to invest with more liquidity and with an insulation from the sky rocketing inflation than gold, the Government need not have to beg to stop buying gold. But instead the Government has gone the wrong way of putting more hurdles on gold investments. It has increased taxes on Gold and silver imports. That didn't deter the public rush for gold. And that in turn costs more Forex for Gold import and thus Rupee value plummets.
India currently holds around 20,000 tons of gold, according to the World Gold Council. At current prices, that would be worth $950 billion. But how to get them out of the private holding of the common man? The only way is to get the economy to perform properly, but with the Government obsessed with corruption in every walk of its life, it is an impossible task.
At this juncture a skewed idea to curb imports is advised by Mr. Jamal Mecklai. He runs a consulting business on Treasury and Forex risk management called Mecklai Financial. He advised the Government to acquire gold from Hindu temples, especially Tirupati, to pledge it and support the dwindling Rupee value. The Government has taken this advise very seriously and started a survey of gold with the Hindu temples from Kerela eyeing the treasure in the Padmanabha Swamy temple.
But Mr. Mecklai's advise is on a fundamentally wrong premise. The gold offered to a temple as part of a prayer or out of gratitude by a devotee is the asset of the temple and that gold has to be used for the purpose it had been offered for. Mr.Mecklai has no understanding of the sentiments of devotees, I'm not drilling into the reason for that here, and counts that the temple assets are owned by the Trustees and convincing them will be easy. Trusteeship is Not ownership and thinking otherwise is unethical and unlawful. So, the Trustees of Tirupati temple or any other temple for that matter, are not owners of the temple or the offerings made to the temple. They are just trusted with the responsibility of managing the temple and the assets as by diktats of the Dharma.
or any other temple for that matter,
So, taking temple gold is a fundamentally flawed idea ethically, morally and legally. We need to have a referendum to decide on whether to take it or not. So, Mr.Mecklai's argument of easy gold from temples is struck out as it is a tedious process, laden with the risk of upping communal tension. We have an alternative, a comparably sensible one rather, from the Chairman of the London Bullion Market Association. He advised that the Reserve Bank of India could swap the 200 tons of gold that it had bought from the International Monetary fund in 2009, for dollars. This will boost dollar inflows at a time, when foreign investors are taking out the green-back from the country.
This is a sensible idea without much disturbance to sentiments and feeling of financial security of the public. But the Government has not mulled over this and got into action to get the gold from temples. Even if the idea of the LBMA head is implemented, there has to be mechanism to prudently manage the economy thereafter to get the pledged gold back and further build a stock with the Government as a reserve.
To do that I seriously doubt the capability of the current cabinet of ministers. We need to pull on till 2014 elections and vote shrewdly to get a shrewd set of administrators who have a track record of growth despite economic adversities locally and globally.
VANDE MATARAM.
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