India and unproductive investment
India is the largest gold importer and consumer in the world and this is nothing to boost about as we invest in importing 800-1000 tons of gold which in fact dumps more than $50 billion in absolute unproductive investment every year. To keep your records straight the amount invested on gold by the Indians is second to oil imports only. To let you know the further impact of this useless investment the cost of import of gold by Indians is close to 3% of GDP of India.
Why we Invest in Gold?
The answer is simple the Indians have a deep rooted belief for centuries that buying gold is the best way of saving for future, social status and a way of investment. Maybe it was true to some extent up to middle of 20th century but not anymore. Most of you will not be surprised to know that despite being branded as poor country India is among the top 10 gold holding countries and we have more than 7% share of gold in our foreign exchange reserve.
Reserve Bank of India and Indian government have been trying to keep in control the common habit of keeping gold of most Indian in their household as a method of investment. The government and RBI have been taking measures to this effect but they haven’t succeeded so far as much they wanted to be. The problem of importing gold from various countries as well from illegal sources on the other hand is increasing every year. There is no country in the world that has a store of more than 22,000 tons of gold in temples and homes which is entirely unproductive and if brought to surface can change the life of this country.
The latest Scheme for monetizing domestic Gold
The government has decided to bring a new scheme for monetizing the gold lying unproductive in Indian households by providing interest on gold by the banks and authorized agencies. Besides the government has decided to issue sovereign gold fund and gold coins with symbol of Ashoka Chakra which should help reduce import of illegal gold in the country. Let’s hope the people of India will prefer to buy coins and bars made in India and help control keep Indian money in India.
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