India Asks Citizens To Turn In Gold To The State

Indians hold a colossal amount of gold in homes and temples across the country, and now the government wants to put it to work.

Prime Minister Narendra Modi has announced a program to get tons of gold out of idleness and put to work as part of India’s nation building program. Modi’s plan has three main areas: a gold mobilization scheme, gold sovereign bonds and Indian gold coin, according to RT.

India Gold

Government aims to activate gold stocks

The government estimates that around 20,000 tons of gold worth around $800 billion are currently contained in homes and temples. The plan aims to collect that gold in banks, which will keep it for up to 15 years and pay 2.25-2.50% interest per year.

Previous schemes offered rates of approximately 1%, which did not prove enough to entice applicants. The Modi government is hoping that the higher interest rate will make this attempt more successful.

“Gold is a security, it gives you earnings and now on it is going to be a part of our nation building,” Modi said. The scheme will also include gold sovereign bonds which offer an interest rate of 2.75%. Authorities hope to cut the number of transactions for the precious metal itself.

The final part of the scheme is the first Indian gold coin, available in 5 and 10 gram versions. At the present moment it is estimated that India imports approximately 1,000 tons of gold per year, a number that the government wants to reduce.

Appetite for gold inflates budget deficit

“The government wants to reduce the reliance on gold imports over time,” said an Indian finance ministry official.

Modi previously revealed that India recently became the largest consumer of gold in the world and has bought 562 tons in 2015. Previous table topper China has so far only imported 548 tons so far this year.

India’s appetite for gold has contributed to a record budget deficit of $190 billion 2013. As a result the government raised its import duty on gold to 10%, which led to a decrease in gold imports to $34 billion in 2014.2015.

The famous obsession for gold is due to its status as a sign of social status and wealth. The precious metal is commonly used for wedding gifts, religious offerings and investments.