'People won't trust a piece of paper that has gold written on it'

In his Mann Ki Baat address on Sunday, October 25, Prime Minister Modi advised Indians to invest in the government's gold monetisation scheme.

A Ganesh Nadar/Rediff.com asks Tamil Nadu residents if they would invest in the gold monetisation scheme. Their reactions won't make the finance minister or his boss happy.

Finance Minister Arun Jaitley recently announced a gold monetisation scheme. Under one of the schemes you could buy a sovereign gold bond as an alternative to buying gold. The bond would carry a fixed rate of interest and be redeemable in terms of the face value of the price of gold at the time of redemption by the holder of the bond.

Tamil Nadu -- perhaps slightly more than the rest of India -- is known for its love of gold. So will Tamilians buy sovereign gold bonds instead of gold with their savings? We put this question to people across Tamil Nadu. The answers won't make Mr Jaitley or his boss happy.

T Murugesa Pandian, a former panchayat councillor, feels people will buy the gold bond because ornaments can be stolen. "Gold can be mortgaged by anybody, this bond can be mortgaged by only the purchaser, so it is safer," he says.

Pandian wants post offices to sell the bonds so that it reaches every village, so that it is accessible to every villager.

K Ganesan, a laywer in Chennai, believes South Indians won't invest in the gold monetisation scheme. "When the government asked temples to deposit gold with the RBI (Reserve Bank of India) -- they refused," Ganesan says to prove his point.

"People here (in South India) like actual gold. North Indians will invest in it. When a child is born in their families they will buy gold bonds for 20 years so that the child can use it at that age," he adds.

"People buy gold with cash, as it is unaccounted money," says K R Mohanram, a landlord in Chennai. "For this scheme to succeed the government should insist on a bill for every gold purchase. Only those with accounted money can buy these gold bonds, others will not,"

Mohanram would buy the bond only if he thinks the price of gold will go up. He hopes there is a photo id along with the gold bond so that it is safer. "As long as there is black money people will continue to buy only gold and not these bonds," he says.

"It won't work," says K Dhanalakshmi, a housewife in Chennai. "People like to see gold in their hands. They like to wear it. You can mortgage it anywhere, not only in the bank. Here, nobody buys gold bars, only jewellery which we can use and pass on to our children and grandchildren."

"No villager will go to the bank and buy a piece of paper (bond) with money. He will buy actual gold. It won't work in rural south India," says K Murugesan, a farmer from Nalumavadi village, Tuticorin district. He feels it might work in the cities though.

M Sivasenthil, a forex consultant in Coimbatore, feels the gold monetisation scheme is meant for rich investors and not for middle or lower middle class Indians. "In Tamil Nadu people respect gold. When they buy it, they like to touch it, feel it. The fact that they possess it makes them very happy. They also love gold as jewellery. They will not buy gold bonds because it won't give them the same feeling."

Royappan, who leads a fishermen's union in Rameswaram, says he has heard about the scheme, but feels it will not work among the poor.

"When the poor save money, they buy real gold," explains Royappan. "They will not buy gold bonds. This scheme is meant for the rich who have a lot of money to invest. It is meant for those who consider gold as an investment. For the poor, gold is an ornament to wear and mortgage when times are bad. It is never an investment."

"People in Tamil Nadu buy gold for the women in the house," says A Selvin, a businessman in Nazareth, southern Tamil Nadu. "People like to handle real gold," he says, adding, "Only the very rich can think of buying gold bonds. This scheme will not appeal to the common man."

K Thilagachandra, who owns a restaurant in Tuticorin, believes the scheme will not work in rural India. It may appeal to residents of cities and towns, he says, but only among the rich. Even the poor and middle class in the cities would like to buy actual gold and not a bond, he feels.

"Villagers like to see gold when they buy it," he adds, "they will not trust a piece of paper that has gold written on it."