Could most of it be fool's gold?

Indians are supposed to be hoarding 20,000 tonnes of gold, worth a cool Rs 52 trillion. Naturally, politicians would love to get their hands on this wealth to plug deficits in their indiscriminate spending. To be fair, it is very bad for our economy for so much money to be sitting idle, which keeps on increasing every year. India imports 800-1000 tonnes of gold every year which adds to our trade and current account deficits. Also the price of gold  jumped from Rs 4,400 per 10 grams in 2000 to Rs 31,799 per 10 grams in 2012. It is at Rs 25,248 today. Successive governments have tried to curb this insatiable appetite for gold. The knee jerk reaction of politicians is to increase taxes, which is what the Congress did when tax on gold was increased from 2% to 10%, as at present. Which made smuggling exceedingly lucrative. One kg of gold smuggled in from Dubai gives a profit of Rs 500,000 and lots of people are prepared to take the risk. In the last financial year over 3,500 kg of gold, valued at Rs 10 billion, was seized by officials. Even more must be getting through. Of course, officers are also Indian and presumably love gold as much as ordinary folks so 11.261 kg of seized gold, worth Rs 29.2 million, disappeared from the customs warehouse. Why it was sitting in a warehouse at Indira Gandhi Airport in Delhi, a known den of corruption, is a mystery. Surely, any gold that is seized should go straight into Reserve Bank vaults from where it can be sold to jewelers, thus reducing import pressures? To bring our love of gold into the open the present government announced 3 gold schemes. One will take in gold ornaments, melt them down into pure gold and issue bonds against that, which will pay interest at 2.25%. The second will allow people to buy gold bonds, instead of buying physical gold, and again the government will pay interest at rates depending on whether they are short, medium or long term. These bonds will be actively traded. The third is coins made of pure gold which people will buy as investment. It was thought that people would want to get some interest on their gold which was sitting in bank lockers and since these are sovereign bonds they are totally safe. Sadly, people have not been enthused by the schemes. The bond scheme has attracted only Rs 1.5 billion because the price was set at 10% premium to the market price. Also you will have to open a demat account with a bank which has charges. As for physical gold, the government has collected only 400 grams out of the estimated 20,000 tonnes. Why? One reason maybe that people are afraid of wealth tax, which is payable on assets worth Rs 3 million and over. Just 150 grams of gold at today's rate will be more than that. The more important reason is that although most jewellery sold in India is said to be 22 carat every item will be much below that level. Jewellers short-change customers so they hang on to what they have. It may glitter but is it gold?