The government and financial sector regulators-the Reserve Bank of India and the Securities and Exchange Board of India -are in discussions to launch financial products intended to discourage demand for gold in its physical form and excessive speculation in real estate...........
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This is an initiative in the right direction. Market and analysts will always resist or try to discourage such moves, as the ‘margins’ come down as transparency and availability of user-friendly financial instruments increase. Perhaps RBI and GOI could consider introducing new and innovative instruments in mutual fund and prepaid payment instruments segments. If half the effort GOI is taking to market a still-born product like New Pension Scheme even before a supporting legislation is in place to promote gold-backed financial instruments on the lines suggested by Dr Rangarajan or even Gold-backed Debit Cards(GDC), the investor perception will change. If a depositor agrees to maintain an average balance of a pre-decided amount, his account should be credited with gold of equivalent value and issued a GDC which he can use to withdraw cash, make payments and buy things like any other debit card, but his balances in the account will vary with the price of gold any day. This is just an example. Similar instruments against commodities and services could be thought of. Real estate related financial instruments can turn out to be highly speculative and providing safety of invested funds can be a tough task.
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