India Gold Policy Centre to conduct survey to find ways to incentivise idle household gold

KOLKATA: A centre at the Indian Institute of Management Ahmedabad (IIM-A) is conducting a nation-wide survey to finalize the list of incentives that would induce resident households to bring into circulation a part of the 25,000 tonnes of gold lying idle, thus helping reduce both the import bill and a chronic gap in the current account.

IIM-A’s India Gold Policy Centre (IGPC) is doing the survey in 25 states, and both monetary and non-monetary incentives have been listed in the questionnaire. The outcome will help both the Centre and the gold trade to work out a framework to popularise the Gold Monetisation Scheme (GMS), which has remained a non-starter since its introduction five years ago.

“Depositors look for fungibility more than the interest rate and that is missing completely in GMS because that doesn’t serve the purpose for which they hold their savings in gold,” Prof Arvind Sahay, chairperson of IGPC at IIM-A, told ET. “Secondly, every agent within the value chain of mobilising deposits needs an incentive to operate. The focus has been on CPTCs (collection and purity testing centres) and refiners, whereas the business is to be majorly run by a bank and a jeweller. The product is designed with greater risks for banks to manage with a cash flow that is negative. And for a jeweller there is no incentive to operate, and the incentive is not just about direct monetary benefit.”

Sahay added that with zero incentive payout from the government, the scheme can still be successful if banks are given the required flexibility to operate and jewellers empanelled by banks work like direct selling agents. Each agent in the value chain has their core competency and letting them operate within their competency is what will bring efficiency.

“If GMS was planned on the prospective then in five years, we would have already mobilised at least 150 to 200 tonnes with proposed changes,” Sahay added.

Surendra Mehta, national secretary, India Bullion & Jewellers Association, said that IGPC has rightly pointed out that jewellers be involved in GMS for confidence building among customers so that they can unlock their household gold.

IGPC, a body floated by the World Gold Council, has appointed People Research on India’s Consumer Economy (PRICE) to carry out the survey. It is planned to be bi-annual for five consecutive years and is worked on a sample frame of 200,000 households covering 25 states.