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.