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Gold is world's ultimate currency, former Indian central banker says

Section: Daily Dispatches

Central bankers can tell the truth but only when they retire.

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Time for a Comprehensive Gold Policy, Former Indian Central Banker Says

From the Press Trust of India
via The Times of India, Mumbai
Sunday, January 29, 2017

HYDERABAD, India -- Former Reserve Bank Governor Venugopal Reddy said today the government needs to come out with a comprehensive gold policy owing to the metal's role in the economy and to start handling the precious metal in a better way.

Speaking at ongoing Hyderabad Literary Festival here, Reddy also said it was the confiscated gold from smugglers that was pledged in the international market to tide over the country's balance of payments crisis in 1990.

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"It is time we have a positive approach to policy for gold. There must be positive comprehensive gold policy and I believe it is so important for the economy because so many people are dependent on it," he said.

"Crores of rupees are traded in the market -- so many are consumers, so many are producers -- and the linkage it to financial sector is increasing. Therefore, it is time for the government to think of issuing a white paper on a positive, comprehensive policy for gold," Reddy said in his speech, which was titled "Gold -- Black, White, and Yellow."

He said that in 2015-16 for the "first time" there was some positive signal from the government's side in regard to gold.

According to Reddy, launching a gold scheme and making a permanent account number number (PAN) compulsory for purchases of gold jewellery worth more than Rs 2 lakh shows the seriousness of the government in making the making gold a commodity.

"We also found that the gold jewellers were asked to provide PAN details of consumers who bought jewellery worth more than Rs 2 lakh so that it can be tracked. Recognition of gold as a commodity or something is important that public policy cannot ignore. These are signs of positive policy," he opined.

Recalling the experiences faced in 1990 in the balance-of-payments crisis, he said the government had very little gold of its own and most of the metal put out in the international market was seized from smugglers.

"The government of India had leased gold to the State Bank of India" (during the 1990 crisis). "How did the government of India come into possession of gold? Most of the gold was confiscated from smugglers. So the smuggled gold, the confiscated gold, came in handy," Reddy said.

"Smugglers also helped us to get over the balance-of-payments crisis," he said in a lighter vein.

He maintained that gold is the ultimate currency in the world, though domestically possessing it is part of Indian culture and for women it acts like insurance.

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