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Gold Monetisation Scheme would gain popularity if focus shifts to coins

Ms.Nirupama Soundararajan from Pahle India Foundation

Ms. Nirupama from Phale India Foundation has been closely working with government agencies on policy matters. She strongly feels that India need a unified regulator for the gold sector. On spot gold exchange, she believes that it should facilitate retail participation. She feels GMS could be revived if marketing strategy is tweaked away from jewellery to investment gold. On sovereign gold bond, she feels, government should consider hedging gold exposure as the scheme grows big. Excerpt from the interview with Ms. Nirupama done at IIGC 2018 is presented below.

NitiAayog has come out with its report, “Transforming Indian Gold Market”. You have just moderated a session on Make in India. So, let’s get from you the summary of the discussion. Let’s start with “Make in India”.

Make in India is one of the flagship programmes of Government of India to integrate gems and jewellery sector. It is quite important for the sector. At present, the gem and jewellery sector is not a priority sector, but I hope it will become one soon.

Broadly four things were discussed. First, about refining because that’s truly make in India. Second on exports. What we need to do for growing exports? For exports, we need get Hallmarking in order and open up new markets. The industry believes that they should look at new countries, understand the kind of jewellery demanded in these countries and manufacture those kinds of product. What we manufacture today may not be what is demanded in those countries.

Tell us about your perspective on the regulatory reforms needed in the gold market today

Today, Gold per se,is regulated by more than thirteen regulators. If we have thirteen regulators for different aspects, it is only natural that many regulations will be at cross purposes.I think the first thing to consider is to look at a unified regulator for anything to do with gold. Other thing that they can look at is the gold spot exchange. Announcement has come. Creation of bullion banks is another needed reform. It would ease financing and refinancing for the sector.Regulatory framework should also look at vaulting especially in context of spot exchange.

Coming to gold spot exchange, what would you like to see in that?

There are two or three things we need to consider while discussing spot exchange.

One, do we want every trade in gold to compulsorily happen on the spot exchange or are we going to allow trades outside the exchange also? Government should decide on this. Second aspect is on contracts. Are we going to allow any kind of netting or is it going to be tradeto trade?

My basic point is spot exchange of any format that we put in place must facilitate retail participation. You and I should be able to access the spot exchange to buy and sell gold. The spot exchange should be able to deliver its promise on transparency in terms of gold price and purity. It should also facilitate holding of gold in dematerialized / digital form and get access to physical metal on demand. If we do not do thatit will defeat the larger purpose.

In your opinion, how to make gold monetization scheme successful?

I think the process that has been prescribed under gold monetization is little too hard to follow for a consumer. First, I need to have at least thirty grams of pure gold. Second is to go to the Collection and Purity Testing Centres (CPTCs) to deposit my gold. Honestly, CPTCs are not easy to locate and I would not want to go to unfamiliar areas just for that. The process of depositing gold can be made more convenient to consumer. The other thing is, in my opinion, the marketing strategyneeds rethinking. Jewellery has a high emotional connect with the consumer. Also, it has higher value-addition. So, parting away with jewellery is not easy decision. Why not focus on investment gold such as coins and leave the jewellery aside? In my opinion, marketing should focus on the getting the coins out. It is easier to assay them as most of them are Swiss coins sold in tamper-proof packs. Second, the sentimental value attached to coins is relatively less.  So, I think marketing focus should be more on coins. Banks also can create an ecosystem where coins can come back. So, by changing the marketing focus to coins and creating a conducive eco-system in banks, the response to the scheme can be improved.

How about Sovereign Gold Bond?

Its an interesting preposition to cater to investment demand in gold. It has been launched specifically to reduce physical gold imports for meeting investment demand. Any financial investment product in gold such as gold etf, or digital gold has to be backed by physical gold. However, under Sovereign Bond Scheme, as government is the guarantor of the scheme, it is not backed by purchase of physical gold. In some ways, it has affected the Gold ETF market in India. As the size of these bonds grow, I feel government should hedge its exposure in gold.

How has been your experience at IIGC 2018?

I am enjoying all the discussions. Looking forward to rest of panel discussion as well. Thank you.

Disclaimer: Views are personal and not the views of the publisher.