.....Hence, neither the popular perception that the household purchase of gold constitutes physical savings nor the perception that it constitutes consumption by household is reflected in national income accounting. A 2011 working paper by the Reserve Bank of India highlighted this anomaly. Hence, it may be incorrect to treat valuables and, hence, gold purchases by households as GCF in the economy from technical as well as behavioural point of view (consumption, investment and social security motives)...............
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There cannot be a crisper way to describe the need for a Gold Policy than the concluding observation:
“Thus, the present treatment of gold under national income, balance of payment and its links to CAC all need careful harmonization. At present there is no policy that tries to reconcile these divergent aspects. Perhaps a gold regulator or a gold policy is an idea whose time has arrived.”
Gold which no doubt is the villain in the Indian economy can be reformed into a saviour, if there is a political will to seriously go ahead with the following initiatives(the list is illustrative) which have already seen some beginning during the last one year:
• Make a realistic estimate of surface gold stock in India. Individuals and institutions holding gold stock above a threshold level should report the quantum of gold held to a designated authority.
• Insist on standardisation of a reasonable portion of gold held by institutions. Infrastructure for such standardisation should precede.
• Encourage financial institutions to increase their gold portfolio. Organisations including religious institutions should be provided incentives to deposit gold with banks.
• Establish a National Registry to keep track of inflow, stock and outflow of gold in various forms.
• Encourage introduction of gold-backed investment instruments.
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