Need shift in people's attitude to cut gold demand: RBI

A big shift is needed in people's social and cultural attitudes towards gold to cut its demand, which in turn will help ease the current account situation, Reserve Bank Deputy Governor K C Chakrabarty has said.

"Ninety per cent of the gold demand is jewellery or to offer to God. Both have to stop," Chakrabarty said, while speaking at an event here over the weekend.

Sounding sensitive to the fact that offerings at temples come under the realm of faith, Chakrabarty said, "Yes, if it is religious value, it is the faith, (then) why do you require ornaments of 22 carats gold? Why not 2 carat gold? Ultimately, ornament is ornament."
The societal obsession with gold is an archaic idea of the pre-historic times when India was a rich society of abundance, he said.

"Wearing gold as an ornament was a culture when you were a rich society, when you were contributing to 30 per cent of the GDP of the world. Today, we have become a poor country, we need to change our culture," he said, adding that "social and cultural revolution" was needed in attitude towards gold.

Chakrabarty said there is no "intrinsic value" in the "speculative" investment of gold.
He urged financial wizards like chartered accountants to popularise the non-productivity of investment in gold.

The precious metal can't be used for anything productive and gains in value only because of a "mad rush" for the commodity among speculators and the day this will end, the price will fall sharply, he added.

More than the rich, it is investments by poor which is troublesome, and RBI has already flagged gold loans and sale of gold coins by banks, the Deputy Governor said.

"The problem is that it has become a culture where the poor people are purchasing and ultimately, they are borrowing on that gold at 30 per cent. See the tragedy -- this is the thing and for that, unnecessarily our current account is (suffering)," he added.

Chakrabarty also called for need to reduce oil imports that add to the current account deficit, suggesting more use of bicycles.