“India’s Love for Gold put Economy in ICU.”

There are 22 official languages in India, so there are 22 ways to say gold. Indians want to own gold like Americans want to own houses. It is said in India, “If there is no gold, there will be no wedding.”

Half the country’s gold purchases are for wedding jewelry. Parents start accumulating gold for their daughter’s wedding day as soon as she is born. This gold represents some financial security that the bride brings to the union. It also gives the bride some economic status in the relationship. Even the poorest people in India buy gold, saving a little each week to buy a gram at a time.

Less than 1% of the world’s gold is mined in India. The rest comes from somewhere else. It is the largest consumer of gold in the world, buying nearly a third of production in recent years. Some estimates say that 10% of all gold is held in India. In recent years, India has consistently been the world’s biggest importer of gold. In 2012, we bought 863 tones of gold which is 28% of global purchases.

Yellow metal purchases have widened the country’s current account deficit to 5.4% of GDP. India’s current account deficit was roughly about $80 billion in 2012-13 out of which gold import alone amounted to about $60 billion. Our appetite for the yellow metal could jeopardize economic stability.

Does the Indian government and its central bank’s short –to-medium term solution to reduce demand for imported gold by hiking import duties and putting sundry restrictions such as banning credit-card purchased gold, etc.will control current account deficit.

But our Govt and Central bank instead of finding out long term solutions started taking short-cut way to reduce imports.

Recently the Indian government is digging for 1,000 tons of gold was buried under a ruined palace after a sage dreamt. Does Swami Sarkar’s dream of 1,000 tons would be enough to replace all of India’s imports for a year and reduce current account deficit?

And our central bank went one step ahead and sent letters to temples asking them to let the government know exactly how much bullion is in their possession.

Instead of running behind hidden treasury and keeping eye on god’s gold …

The Indian government and its central bank should make Indian public aware of other financial products and financial paper instruments such as gold accumulation plans, gold pensions, and gold-linked accounts.

“There is a need for banks to introduce new gold-backed financial products that may reduce or postpone the demand for gold imports and it will drop its obsession with the barbarous relic (John Maynard Keynes once famously called gold the “barbarous relic).

Article Written by: Mr. Biswajit Behera, he is a Financial Analyst in MNC based in Bangalore.

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