Why Indian government’s schemes to kill gold have failed

gata.org / By Shishir Asthana via MoneyControl.com, Mumbai, India / May 17, 2017

One area where this government doesn’t seem to want to learn from its mistakes is gold schemes. Its fixation with launching these schemes despite repeated failures makes one wonder if it is pride that stands in the way of accepting that these have been duds.

To be fair there is nothing wrong with the idea of seeking gold hoarded at homes or in bank lockers to be brought into the economy. It was an innovative idea that the government dared to test. Being the second largest buyers of gold, which accounts for more than 25 percent of India’s trade deficit, Indians have persisted in investing in an unproductive asset. …

The fact is that the product itself is faulty. Gold bond buyers do not enjoy the liquidity that a physical gold buyer does. There is a lock-in period for gold bonds of eight years. On the other hand, someone buying physical gold does not have to follow any such restrictions.

Though selling in exchanges is allowed, there is no secondary market for gold bonds. Finally a gold bond buyer exposes himself to scrutiny, while there is still room for anonymity for physical gold buyers.

Unless these issues are addressed, the gold bonds are unlikely to pick up. …

… For the remainder of the report:

http://www.moneycontrol.com/news/business/economy/why-modis-gold-schemes…

SOURCE

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