Writing today in The Hindu, the second-largest English-language newspaper
in India, published in Chennai (formerly Madras), former Indian government
official Sutanu Behuria explains why the sort of monetization --
paperization, actually -- recently proposed by the country's government for
the vast amount of gold held by the Indian public is not going to happen any
time soon.
It's not just because of the centrality of gold in Indian culture and
religion, Behuria writes. It's because the country lacks the infrastructure
that would be necessary to standardize and evaluate any gold submitted for
monetization.
"Previous gold monetization schemes," Behuria notes, "have had
very little success. The 1999 gold deposit scheme could not achieve even a
conservative target of 50 tonnes. A major reason for the failure has been the
inherent distrust in the credibility of the valuation process, besides the
reluctance on the part of individuals to disclose gold assets for fear of
attracting punitive levies. ...
"The only way to accurately determine gold content in jewellery is to
melt it and then draw a representative sample for testing. Such purity
verification infrastructure is almost nonexistent in India. The assaying and
hallmarking of handmade gold jewellery is at best a misplaced assurance prone
to substantial misinterpretation. Further, given the size of the country and
the widespread demand for gold in the form of jewellery, even such
infrastructure as is available is woefully inadequate. ...
"Successful implementation and operationalization of the gold
monetization scheme would necessarily require 1) a national network of purity
verification centers, 2) world-class refining and fabrication facilities, and
3) secure storage and distribution facilities. In addition, details of
interest to be paid, tenure of the deposit, collateralized lending, and so on
will have to be worked out.
"It is likely that it will take considerable time to put the
architecture in place."
Behuria's commentary is rather misleadingly headlined "All That
Glitters Is Not Gold" and it's posted at The Hindu's Internet site here:
http://www.thehindubusinessline.com/opinion/c...-glitters-is...
