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The gold fixation

By Sunanda K Datta Ray
March 19, 2005 13:27 IST
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Will Chidambaram's "gold units" proposal purge our people's profound commitment to the metal?

The Sydney jeweller who sold us our wedding rings recommended platinum. Then, learning that we were returning to live in India, he advised, "Better take gold. Otherwise, they might think it's silver!"

We accepted his advice not because of any feeling for the metal but because he spoke with dual authority. History bound his shop with the New South Wales gold rush of 1851, preserved in the mock-up of a mining town at Ballarat.

Contemporary reports tell us that so many Australians flocked to make their fortune - a lame prospector leading a blind one among them - that Melbourne was left with just two policemen.

Even in those pre-globalisation days, he was aware of India's profound commitment to gold.

It is difficult to believe that a wave of Palaniappan Chidambaram's budgetary wand will succeed in purging such a deeply held belief. Indeed, Chidambaram is surely at odds here with his boss.

One of Manmohan Singh's first acts on becoming finance minister in 1991 was to bring back the gold that Chandrashekar had sent to London and Tokyo when he found the foreign exchange kitty empty.

Repatriation had a miraculous effect. It convinced Indians that we were not the world's destitutes. It reassured the world that India was a safe place to do business with and invest in.

The "gold units" Chidambaram speaks off will never make such a dramatic impact. It's worse than the dreary receipts that have replaced elaborately engraved share certificates now that India has caught up with dematting.

I say worse because in the case of scripless shares, one piece of paper has replaced another.

Chidambaram's proposal means handing in your lustrous gold and getting a certificate in return. Very few, if any, Indians will find that half as satisfying as the metal in whatever form.

Clearly, Manmohan Singh had a better understanding of symbolic values and of the human psychology that underlies all economic trends. Instinct is something that the law suppresses but cannot change.

The People's Republic of China might forbid indulgence in gold but a Chinese who made quick money in Hong Kong or Calcutta didn't think twice before filling his mouth with gold teeth.

So pervasive was this cultural status symbol that I always suspected that it was one reason why the overseas Chinese also made such enthusiastic dentists.

As if to prove my guess, the Chinese in Singapore, which might be called the world's biggest Chinatown, don't any longer hanker after gold teeth.

That is not because some ardent Singaporean finance minister has ordered them to trade in gold for certificates. It is because of the enlightenment that comes of education and an overall higher standard of living.

Singapore's Chinese flaunt modern totems of wealth. So do sophisticated Indians. They buy antiques, paintings and other art works. If it's jewellery, they are more likely to invest in precious stones set in platinum.

It's village India - the 700 million in the countryside - that accounts for two-thirds of the $ 10 billion worth of gold bought last year.

Gold is the indulgence of the simple. That, too, is evident in Singapore where the relatively scruffy district called Little India literally glitters with gold shops.

The workmanship is crude but the purity of the metal is guaranteed. Its popularity testifies to the social status of most Indian Singaporeans.

Some might detect a link here with Mahathir Mohamad, Malaysia's long-time prime minister, and his proposal for a gold dinar as the new currency of commerce among Islamic nations. The new coin would weigh 4.25 grams of 24-carat gold.

Mahathir saw it as a stable unit of accounting of political significance that would demonstrate to the non-Islamic world the superiority of the Ummah. Perhaps, the veteran Malaysian leader's subcontinental origins had something to do with his preference.

Of course, there are exceptions to this rule. When Swraj Paul was trying to make inroads into Indian industry he discovered that some of the biggest business houses showed some of their capital in bullion.

When he asked to see the gold, he was told the families with a controlling interest held it in the form of ornaments. I doubt if many of the wives and daughters of these tycoons actually adorned their limbs with gold bangles and bracelets.

But for them, too, gold is a symbol, as it was for Franklin D Roosevelt who held that a return to international stability "must be based on gold".

That was after most governments abolished "that barbarous relic", as John Maynard Keynes called the gold standard. The layman will, however, agree with Roosevelt.

Gold convertibility cannot but restrain credit creation and check the kind of galloping inflation that follows an excess of easily printed paper money. No wonder the US had to lend Germany money after World War II to pay France to repay the US!

If gold disappears, the language, too, must be revised. Two newspaper headlines stare at me as I write this. "Narang shoots down gold," says one, "Gagan, Samresh shoot gold" reads the other.

What will be the new symbol of excellence? Gold units? Or electronic gold which, we are assured, is the ultimate worldwide free market currency? And what of popular aphorisms?

Will people be as good as gold units and boast hearts of electronic gold? All one can be sure of if Chidambaram's plans for gold units and an impost on hallmarked jewellery get going is that all that glitters truly will not be gold.

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Sunanda K Datta Ray
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