FT asks if Indians’ love of gold is destroying their economy
Based on new research by investment bank Macquarie titled India’s Fatal Attraction, the FT asks if India’s weddings are destroying its economy given the huge importance of gold in the culture – especially between October and January, when festival season turns into wedding season and some 20 million Indians tie the knot.
According to the research by Australia’s Macquarie, Indian households are hoarding 18,000 metric tonnes of gold worth over $950 billion, representing 50% of the country’s GDP. Indian households own 11% of the global total and it is estimated that 7% – 8% of India’s 329 billion households held their savings in gold in 2009 – 2010.
The Financial Times reports the vast amounts of gold widens the country’s current account deficit, weakens the rupee and generally keeping money that could flow into the economy locked up in cupboards and jewellery boxes.
IB Times reports gold imports are India’s third-largest merchandise imports after crude oil and capital goods. In 2010, 92% of the supply was met through net imports and the rest through recycled gold and other sources.
WSJ Online reported on Monday India’s wedding-season gold demand has nearly disappeared as local prices climb to near-record levels because of a fall in the rupee’s value, sparking a rush to sell scrap during the usually peak buying period and quotes Prithviraj Kothari, president of the Bombay Bullion Association: “There is virtually no demand for gold.”