The recent record-breaking discovery of over US$22 billion dollars of gold in one of the vaults in the Sree Padmanabhaswamy Temple in Kerala again raises an interesting debate.
Religious figures including the Kerala Chief Minister Oommen Chandy publicly declared that the gold will remain with the temple as it belongs to the Gods while intellectuals, including former Supreme Court judge Justice VR Krishna Iyer have suggested it be used for the public good such as education and infrastructure in the poorest of poor areas of the country. While each side has its merits, the debate does raise an interesting point. Why is it that most civilised nations naturally choose to return gold to the state, which in turn would be used for welfare, a majority of Indians, particularly Hindus, choose to return it to the Gods, who in turn will protect and reward them at some juncture in the future.
I first started to analyse the situation by putting the question to my parents. My father, a Hindu by birth, had a less conservative approach that the gold must go to the Reserve Bank of India to be added to the national gold reserves but must continue to be held as gold out of respect to the Gods. My mother, a practicing Christian, on the other hand argued that the gold must be immediately liquidated and the money spent to open schools, hospitals and roads in less developed parts of India because clearly, that’s what God would have wanted. I clearly wasn’t going to get a consistent answer from them so I decided to analyse the situation through independent research.
Within India, a majority of religious practices such as Hinduism are transactional. People give to God and anticipate an out-of-turn reward such as forgiveness or increased wealth and happiness. It is not only tolerated, but encouraged leading to a perception that God rewards those out of turn that shower him with gold and other gifts. Indian leaders such as Karnataka minister G Janardhan Reddy fortify this behavior by publically gifting the Gods a crown of gold and diamonds worth Rs 45 crore (US$10m) to seek His blessings for the Brahmani Steel Plant that he has set up in Andhra Pradesh.
From a macro economic perspective, this can be viewed as a parallel fiscal system in the economy wherein an additional contributory tax is collected from those more successful. After all, what’s wrong with a system that increases revenue collection on a voluntary basis (assuming it is from legitimate sources)? The more money religious institutions collect, the better they are able to serve society, correct? Indeed, only if the money and gold collected were put to public use instead of lying in vaults for the gods. Himachal Pradesh for example has come out with a provision that allows temple trusts to melt tons of gold and silver lying in their coffers and convert them into coins and mementoes for sale enabling the Temple trust to direct funds to social causes. Perhaps Kerala could follow a similar lead but religious and populist politics will ensure that this never eventuates in the near future.
On the flip side, there is a bright side to this notion of stashing away gold in Indian temples and perhaps Hinduism should be given more credit than meets the eye. Gold standards have been the most common basis for monetary policies throughout history until it was displaced by fiat currency or paper notes in the late 20th century. However, every country continues to manage a portion of its currency reserves in the form of gold bullion as gold offers a good hedge against inflation or other economic disruptions when paper contracts such as currency notes lose their credibility.
During economic turmoil, the price of gold increases inversely to other instruments such as stocks since it is often referred to as “fear metal” in that you buy it when you are afraid of every other investment, similar to religion in that you turn to god in times of fear.
Given the conflicting views of religion and economics, the best possible solution to the problem lies in transforming the gold into an economic asset without physically moving it out of the temples. This can be accomplished by formally valuing the gold in the temples and including the value in the country’s gold currency reserves. This ensures that the gold remains in the hands of the Gods while it significantly boosts the nations currency reserves eliminating the need for the country to buy gold from the IMF to boost its reserves as it did in 2009 for $6.7 billion.
I’m sure the Gods would agree.
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By Gaurav Sadarangani