Band aid on gold
- In Mumbai, new warship system malfunctions, Navy officer killed
- SC calls Sahara proposal an âinsultâ, Subrata Roy to stay in jail till March 11
- I'm not a terrorist, Modi should have met me: Arvind Kejriwal
- Modi to hold 'Chai Pe Charcha' on women empowerment on Saturday
- Will not campaign for any candidate, says Anna Hazare
Government must ask why demand for gold is rising, widen access to financial system and other assets
The government is trying to curb the demand for gold by raising import duties and asking banks not to sell gold to customers. This would pave the way for unofficial gold imports and a black market, creating more difficulties in the system. The question to ask is, why is the demand for gold rising, despite the reduced rates of income and consumption in the economy.
There are two important factors in this phenomenon, and neither lends itself to a short-term solution of the kind the government is searching for. The first is that poorer households are buying gold for their new savings as they are unbanked and do not have access to other financial assets. A poor householder who gets some income from NREGA or any other government scheme that he did not have earlier is bound to keep some part of the income as savings. This would happen even if the level of savings per poor household were very small. At the national level, if a small element of the government's spending on transfer payments to the poor is to be saved, as any household would do, then in the present system, has the government thought about where it would put the savings? While there has been discussion about how banks would disburse cash to the poor, it is rather unimaginative to think that every single penny would be consumed. For a poor household, it is worth saving even a tiny amount to provide for future plans or emergencies. Access to the financial system and other assets is limited, and gold turns out to be the only available asset.
- Chai pe Charcha gets police protection, EC officials to check on poll norm violation
- Complaint against Kejriwal: Kutch cops gather evidence
- AAP chief to hold first public meeting in Gujarat today
- Nominations for North Bangalore primary begin
- ‘Our campaigning in the state will be out of the box’
- ‘Aai Retire Hotey’ to take the stage for 100th time today