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Hindu Press International
Can Temple Gold Help the Rupee?
on 2013/8/29 18:43:33 ( 1004 reads )

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INDIA, August 26, 2013 (blogs.wsj by Debiprasad Nayak): (HPI Note: We recommend reading the "comments" section of this article where the proposal is rubbished by one reader after another.)

At a time when nothing seems to be able to stem the Indian rupee's decline, a novel idea to boost the currency is doing the rounds: use the tons of gold stashed away in people's homes and in temples.

The rupee sank to an all-time low of 65.56 for one U.S. dollar on Thursday (before recovering slightly Friday,) partly on fears that India will find it tough to finance its wide current-account deficit; the gap reflects the fact that India imports more than its exports.

To lower the deficit, the Indian government has announced several steps in recent weeks to reduce its imports, such as raising the import duties on gold. But market experts aren't so sure that high prices will deter India's gold buyers, so some people have come up with an alternate solution: recycle the gold already in India.

India currently holds around 20,000 tons of gold, according to the World Gold Council. At current prices, that would be worth $950 billion. A small piece of this gold - around 558 tons or 2.79% - is held by the Reserve Bank of India, making it the 11th largest official owner of gold in the world, according to data from the World Gold Council and International Monetary Fund. [For comparison, the famous vault of Fort Knox, Kentucky, alone hold 5,000 tons.]

The rest is held by households and individuals, in their homes or bank vaults, and by Indian temples, which have historically received gold bars, coins and even jewelry as donations from patrons.

There is no firm estimate of how much gold is held by Indian temples, but it is believed to be several thousand tons. In Sri Padmanabhaswamy temple in Kerala, where a large and intact hoard of temple treasure was discovered in 2011, there is estimated to be gold and jewelry valued at one trillion rupees (US$16 billion.)

Jamal Mecklai, founder of Mumbai-based currency consulting firm Mecklai Financial, suggested that the Indian government should make use of some of this temple gold. In a commentary published last week, Mr. Mecklai said the government should ask the Tirupati Trust Foundation, linked to the eponymous south Indian temple, to deposit its gold stock with India's state-run banks.

Mr. Mecklai said the banks could pay the Tirupati Trust an interest for its gold, and then sell a large portion of the stock in the domestic market - thus ultimately, reducing the need to import. Mr. Mecklai estimated that the Tirupati Trust holds about 1,700 tons of gold, which would be worth around $81 billion.

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