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Wealth of nations
Modi Wants to Put Hindu Gold to Work

Narendra Modi has an interesting new plan for increasing capital flows in India by getting the country’s Hindu temples to put their vast stores of gold into the banking system. Reuters reports:

India is the world’s biggest consumer of gold and its ancient temples have collected billions of dollars in jewellery, bars and coins over the centuries – all hidden securely in vaults, some ancient and some modern.

A few years ago a treasure of gold worth an estimated $20 billion was discovered in secret subterranean vaults in the Sree Padmanabha Swamy temple in Kerala state.

Now, Prime Minister Narendra Modi wants to get his hands on this temple gold, estimated at about 3,000 tonnes, more than two thirds of the gold held in the U.S bullion depository at Fort Knox, Kentucky, to help tackle India’s chronic trade imbalance.

Modi’s government is planning to launch a scheme in May that would encourage temples to deposit their gold with banks in return for interest payments.

The government would melt the gold and loan it to jewellers to meet an insatiable appetite for gold and reduce economically-crippling gold imports, which accounted for 28 percent of India’s trade deficit in the year ending March 2013.

India’s annual gold imports of 800 to 1,000 tonnes could be cut by a quarter if temples decided to participate in the scheme, say government and industry sources.

The plan also includes a push to get India’s rich families to put their own substantial gold holdings and other precious materials into the system. It’s a quixotic-sounding plan, but from 30,000 feet it sounds like it might be a sound move. Mobilizing these assets so that they can provide returns rather than just collecting dust in vaults should have positive effects, even if only on the margins.

As Reuters notes, some temples are on board with the idea, but some others are unhappy. The New York Times quotes a top official at the World Hindu Council (Vishway Hindu Parishad):

“For thousands of years, Hindu society has donated this gold to temples whose trusts have safeguarded it,” said Vyankatesh Abdeo, the organization’s all-India secretary. “Our wealth is in gold; the government’s evil eye is on this wealth. This is absolutely wrong, and we oppose this move. This wealth is God’s, not the government’s.”

Modi has been called the Indian Erdogan for trying to combine a religiously-based identity politics with a reformist agenda, in opposition to an entrenched, secularist “deep state.” Ever since his election, his boosters have sought to promote his reformist credentials in Western media while downplaying the Hindu nationalist side of his character. This story, though perhaps ultimately inconsequential, illustrates the enduring tensions between the two sides of his identity. Opting for a quirky modernization scheme at the risk of alienating small parts of his base may not have been much of a gamble in this case, but it does show that he will have to walk a fine line at times. The degree to which he manages to reconcile the two sides will tell us much about how successful his leadership of India will be.

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  • Fat_Man

    Advice to India’s Hindu Temples from a different religious tradition: “Put not your trust in Princes”

  • Dan Greene

    “Modi’s government is planning to launch a scheme in May that would encourage temples to deposit their gold with banks in return for interest payments.”

    And how would the temples be “encouraged” to give up their gold? What interest rate would they get? Sounds like extortion to me.

    >>”It’s a quixotic-sounding plan, but from 30,000 feet it sounds like it might be a sound move. Mobilizing these assets so that they can provide returns rather than just collecting dust in vaults should have positive effects, even if only on the margins.”

    Notice how TAI loves the idea that the government of India might coerce religious institutions and individuals to surrender their gold to the government? Of course, if such a scheme happened here, TAI would condemn it as an example of the corruption and arrogance of the “blue model” or some such rhetoric. TAI sees India as the great Asian bulwark against China, and therefore, whatever looting the Indian government needs to do to maximize the economic and military power of the Indian state is just fine with all the TAI “free marketeers.”

    24/7 hypocrisy.

    • JR

      Unless it were to truly be coercive, I doubt this idea will get far of the ground. In India, gold is a cultural treasure in a way a simple brick of gold sitting in a vault at Fed building on Maiden Ln. is not. And what TAI refers to as a blue model is a polite way of saying “the people who drove Detroit into bankruptcy, and are busy driving Chicago, and IL in general, as well as RI and a whole lot of cities in CA, you know aka the Democratic Party urban-liberal wing”. Examples include Chuy Garcia, Bill de Blasion, Elizabeth Warren as well as much smaller “race card” political types like Kwame Brown and Ray Nagin. The “you didn’t build that” people.

      • Dan Greene

        >>”Unless it were to truly be coercive, I doubt this idea will get far of the ground.”

        Yes, I agree. For it to work, it will have to be coercive. And the temples wouldn’t be voicing concern if they didn’t suspect as much also. So, if Modi’s policy must necessarily be either coercive or ineffective, then why does TAI think that “it might just be a sound move?” Wonder what the TAI view of FDR’s 1934 gold confiscation is. (Wonder if FDR is the inspiration for whatever Modi is contemplating.)

        Yes, I was stretching the scope of the “blue model” concept, but my question stands: Would TAI be supportive of this sort of thing in the US?

  • Josephbleau

    This would eliminate gold imports for 3 years? What a deal, an earthshaking benefit. Any investment income will be dwarfed by the salarys of the people who administer the program and steal from it in the form of bribes. Let the temples buy farmland and tractors with the gold and let the monks hire good folks to work for them.

  • disqus_RNbd3GHFyo

    Why not they ask to take gold and money from Muslim dargah, while they getting facility of sub-sidy & tax free.

    Not sure, if the same happen with Muslim then they start fight agaist this & govt. will came on back-foot.

    they know Hindu will give gold and no voice will become louder.

  • FriendlyGoat

    It’s really hard to imagine anything much more useless to the people of India than 3,000 tonnes of gold in Hindu temples, whether on display or in vaults.

    • Dan Greene

      It may be useless, but does that mean that the GoI should be trying to get hold of it by hook or by crook?

      • FriendlyGoat

        I think I have a little bit of trouble with the quote from the official at the World Hindu Council: “This money is God’s, not the government’s”.

        Of course we do not want to see a heist of hard assets going to corruption, to cronies, or up in smoke to traders. But I do not believe that the God of Hinduism needs a pile of gold while most of a billion people have myriad actual needs. Whether Modi will do this and other things well or badly remains to be seen, in my mind. I really don’t know.

        But gold in temples? For what?

        • Dan Greene

          “This money is God’s, not the government’s”.

          Well, that may be a rationalization or not depending on one’s point of view, but that gold was given to those temples over the years–or centuries or millennia. Yes, just as Henry VIII confiscated Church property in England to fund the English state, Modi could do likewise. But once confiscation is allowed, it’s Katy-bar-the-door.

          Why do we need to worry about what Hindu temples do with their gold? If Modi has an offer that induces these temples and private owners of gold to give it up for interest of some kind, then OK. But as JR said below, and I agree with him, it’s hard to see how that might happen.

          And as I asked below, would TAI be so favorable to a state attempt to take over private gold holdings if it were here in the US? Well, who knows, maybe this “conservative” magazine WOULD support that.

          • FriendlyGoat

            I get your notice of TAI appearing inconsistent with its regular private-property values by seeming to encourage this proposal ——which MAY amount to confiscation (or not)—–from Modi.

            I also still don’t get the point of 3,000 tonnes of gold in religious vaults in an under-developed country.

          • Dan Greene

            I don’t think that there is any point to be gotten. It’s private wealth, like private wealth anywhere. Could it be used more productively? Yes, it could. I suppose it’s like the increasingly expansive use of eminent domain laws here to seize private property or, as I suggested below, like FDR’s gold confiscation of 1934. The question is whether, in the absence of any viable way to coax most private gold holders in India to part with their gold, one supports a coercive mechanism to put the gold at the disposal of the Indian state.

          • FriendlyGoat

            I’m still waiting to find out how “coercive” this is going to be.

            I also think there might be some differences between gold in private citizen hands and gold in temple vaults. Who really owns that temple stuff? Some religious corporations?

          • Dan Greene

            Yes, it would be interesting to find out, but I think that it is “private” for all intents.

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