All that glitters: Budget offers government a chance to tap gold stocks, monetise them.

Abstract

The Union budget for 2015-16 is important because it will offer us a first glimpse into the government’s thinking on fiscal policy. This will lay the foundations for the next five years. A plan of action to correct for the previous government’s missteps is also expected. In this context, the issue of gold imports is pertinent and the government could consider liberalising them, given that global oil prices are declining, which has led to lower pressure on India’s external account. Would that be a good strategy for it to pursue? Or can an alternative like monetising domestic gold lead to greater financial inclusion and an impetus to growth as well as a long-lasting solution to gold-related problems in India?. Gold has had a unique place in India. Over the course of history, our preference for gold has been influenced by many social, economic and cultural factors. In India, gold is viewed as a liquid asset. It is widely recognised as a vehicle for the intergenerational transfer of wealth as it is considered to be the most efficient store of value. The price of gold, the amount of black money in the economy, the rate of return on and availability of alternate financial assets as well as the general price level are the main factors that determine the demand for gold. As a result of these factors, India is the largest buyer of gold in the world. The demand for this metal is expected to rise in future — given our demographics, we can expect an increase in the number of marriages as well as prosperity. Read more at: https://indianexpress.com/article/opinion/columns/all-that-glitters-4/