The Rs 55,80,000 crore question
That said, an investor can raise several objections against slapping curbs on gold — he should have the freedom to invest where he likes, gold has given pretty good returns in the last decade, it is an ideal hedge against country risk and inflation, it is freely available across India and probably has a better distribution network than even the banking system. It is a fact that jewellery stores outnumber bank branches, insurance agents and mutual fund agents. What’s more, gold can be bought with cash and used as security for short-term finance. Such factors have increased the lure of gold for consumers and investors — but at great cost to the country.
In 1933, the then US president, Franklin Roosevelt, issued an order asking citizens to return gold held by them in a bid to tide over a crisis. Offenders were handed out a fine of $10,000 or 10 years in jail. The rest is history. The US fed became the largest holder of gold in the world. But Indian leaders may not be able to do a Roosevelt. Disturbed by the skewed rise in the prominence of gold, regulators have been trying to shift the allocation of domestic savings from gold to financial products. Measures like the Gold Control Act, the gold deposit scheme, gold exchange traded funds, the trading of gold derivatives on exchanges, tax sops for insurance and mutual funds and the gold import duty have not slowed down India’s huge appetite for the