The gold monetisation scheme, the draft rules for which were announced recently, aims to improve on the earlier version rolled out in 1999, by reducing the minimum deposit from 500 gm to 30 gm. While the nuts and bolts of scheme are yet to be put in, it broadly hints at a waiver of a variety of taxes— income, wealth and capital gains. In other words, it opens up all kinds of possibilities for those who’ve been piling up black money in the shape of gold. In sharp contrast, the government is coming down like a tonne of bricks on all those with black money abroad through the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Bill, 2015, already passed by both Lok Sabha and Rajya Sabha. A cursory glance throws up an inherent paradox—one set of rules for black money stashed in India and another for what’s there abroad.
One way to unlock puzzle would be to look at it as part of a grand design, a great strategy, wherein high networth individuals are being lured with the offer to get their gold under the pillow, whether it be bars, biscuits or jewellery, monetised. At another level, what’s on offer may well be an attempt to plug all holes that allow elbow room for black money generation in the future. Thus, the classical ‘carrot and stick’ approach, where on the one hand the government is imposing a penalty on videshi black money, while on the other hand allowing a one-time exit for those willing to bring into the mainstream their desi black money, no questions asked.
Seen from this perspective, the argument that the scheme would become a success only if the interest rate is pegged in the 4-6 per cent range or anything that would hedge inflation may be slightly misplaced. Reason: those individuals who would be keen to leverage this opportunity would be looking beyond keeping their monetised gold buoyant. Instead, they would recognise the scheme for what it really is—a one-time backroom entry for black money in the larger scheme of things which is the enormous fillip that the Indian economy could get by way of gold under the pillow getting liquidated. Because, that is what Turkey did not long ago with its ‘Gold in Action’ scheme as per the label given by the World Gold Council (WGC).
If Turkey, the world’s fourth largest consumer of gold, could unlock enormous value by pushing about 3,500 tonnes of gold worth $1.8 billion over the last couple of years, think of the potential that remains untapped in India. Sure, it’s an exit route for thousands of those—and there would be quite a few in each and every town and many more in the cities of India —who’ve been hoarding black money in the shape of the yellow metal by the kilos. And they would grab this chance with both hands, of India doing a Turkey, something that the WGC has been keen to see happen for quite a while now. Because the quantum of unlocked value in what is officially the world’s second largest consumer of gold and arguably the top-most market, once the smuggled volumes are factored in, would be mind-boggling.
Even if a fraction of India’s gold under the pillow were to be monetised, the fillip to our economy would be so enormous that it would straightaway push us into the double-digit growth track, with no need to fall back on any puffed-up figures. Simply put, there wouldn’t be any reason to look for antique gold from the temple vault such as the Sri Padmanabha Swamy temple, where the treasure is guesstimated to be over Rs 1 lakh crore, because the Indian households have 60 times as much gold under the pillow, waiting to be brought out. And monetised.